Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

LIFE ASSOCIATION OF SCOTLAND LIMITED BILL [Lords]

As amended, considered; to be read the Third time.

BRITISH TRANSPORT DOCKS BILL (By Order)

Consideration, as amended, deferred till Thursday, 23rd April.

Oral Answers to Questions — MINISTRY OF AVIATION

Prestwick Airport (International Services)

Mr. Grimond: asked the Minister 2. of Aviation if he will ensure that no restrictions are put on international services using Prestwick Airport.

The Minister of Aviation (Mr. Julian Amery): In providing air services at Prestwick or indeed other United Kingdom airports British operators must conform with their air service licences. Foreign airlines must also conform with the appropriate inter-Governmental Air Services Agreements. These things necessarily involve some restrictions.

Mr. Grimond: Is the right hon.. Gentleman aware that this incident has caused widespread concern in Scotland, not only because it is desirable for Scotland to have these international air services but because of its wider implications? Is he further aware that there is a feeling that there is a tendency to expect everybody to come to London if they want to travel on international airways? Can he repudiate this and also say whether

B.O.A.C. intends to increase its services from prestwick?

Mr. Amery: I am grateful to the right hon.. Gentleman for giving me the opportunity to say that there is no question of our trying to move passengers from Scotland to London for inter-continental journeys. I understand from Sir Giles Guthrie that B.O.A.C. will be running some 12 services a week to the United States and Canada from Prestwick.

Sir T. Moore: Is my right hon.. Friend satisfied is two points? The first is that, as a result of this reduction, Prestwick will not suffer, and secondly, that Scandinavian Air Services will be able to maintain sufficient traffic to justify continuing the service through Prestwick.

Mr. Amery: It is my impression that S.A.S. will continue to operate at its present frequency on the Scottish—European rector. Any loss to Prestwick could only be through landing fees, and this is a very small consideration.

Mr. Rankin: As consideration is being given to the development of Stansted as a third international airport for London, will the right hon.. Gentleman consider whether or not Prestwick could play some part in this new development?

Mr. Amery: The recommendation that Stansted should form the third London airport takes full account of the likely development at Prestwick. Which we think will be considerable.

Supersonic Boom

Dr. Bray: asked the Minister of Aviation whether he is supporting research to investigate the possibilities of eliminating the boom from supersonic flight.

The Parliamentary Secretary to the Ministry of Aviation (Mr. Neil Marten): I am supporting research into ways of keeping this noise to a minimum but no method of eliminating it entirely can be foreseen.

Dr. Bray: Is the hon.. Gentleman quite happy about the prospects of being awakened by the boom in the middle of the night? Many of us are extremely keen to see supersonic flight developments but would nevertheless like to be


Sure that greater effort is being put into the problem of the supersonic boom than seems to be the case at present.

Mr. Marten: The answer to the first part of that supplementary question is, "Not really". As regards the second part, the designers of the Concord are well aware of the need to keep the boom within tolerable limits and are doing all they can. The Royal Aircraft Establishment at Farnborough is carrying out a lot of research into such things as the supersonic boom.

Sir A. V. Harvey: Is my hon.. Friend aware that extensive tests are being carried out in the United States on this problem? Is there any arrangement to exchange information between the two countries in order to get the benefit of these researches?

Mr. Marten: We are aware of the tests being carried out in Oklahoma City on behalf of the United States Government. These will be of great interest to us and we will be in touch over the sharing of information.

Dr. Bray: Is the hon.. Gentleman aware that this is a point on which there is likely to be extremely strong public reaction once the problem is appreciated and experience begins to be widespread? It would be extremely unfortunate if the aircraft industry's development were to be frustrated by public reaction which had not been fully anticipated in the early stages.

Mr. Marten: We are going into the question of public reaction and tests on the subjective effects of the supersonic boom are being carried out at Aberporth and at Cambridge University.

Shobdon Aerodrome

Mr. Clive Bossom: asked the Minister of Aviation if he will seek to acquire Shobdon aerodrome in order to keep it open for civil flying.

Mr. Gibson-Watt: asked the Minister of Aviation whether he will initiate immediate discussions with the Secretary of State for Defence with the object of keeping Shobdon aerodrome open for civil flying.

Mr. Marten: It is not the Government's policy to acquire and operate new aerodromes for civil flying. Sale

Of part of this airfield to the former owners has been arranged by the Ministry of Defence and the remainder is to be auctioned on 17th April. It will be for the new owners and the local planning authority to decide whether flying can be permitted and the entry in the "Air Pilot" will have to accord with their decision.

Mr. Bossom: Is my hon.. Friend aware that several air charter companies, including Tacair, have been approached by industrial concerns in Herefordshire to ask whether they will expand their services to Shobdon aerodrome? Even at this late hour is there nothing else that he can do? I am confident that, within five years, this aerodrome will be greatly needed for increased civil flying.

Mr. Marten: I am aware of the facts mentioned by my hon.. Friend but it is up to the local authorities or the air club to acquire the airfield. As I have said, it is not our policy to acquire and operate these aerodromes for civil flying. Perhaps my hon.. Friend will use his good offices to urge the local authorities to purchase the airfield. I think that would be the answer.

Mr. Gibson-Watt: My hon.. Friend did not say in his reply whether he had had discussions with the Air Ministry, as I asked him in my Question. Could he answer me on that point now? Will he please note also that this aerodrome is a considerable centre for gliding, flying and parachuting? Is he further aware that there is a lot of anxiety that this land will be taken over and used for industry or agriculture, which is not a very popular idea in some quarters?
Is he also aware that this area is central to all the Border counties both in England and Wales? Should not an inquiry be set up by the Minister of Aviation and by the Secretary of State for Industry and Trade—[HON.. MEMBERS: "Speech"]—with respect, my supplementary question is much shorter than some we have to put up with in this House. [Interruption.] I am glad that certain hon.. Members opposite take umbrage at what I have just said. I have a stop-watch—

Mr. Speaker: Order I think that the hon.. Gentleman had better proceed


More normally. It would be good thing if his supplementary question came to an end.

Mr. Gibson-Watt: I am grateful to you, Mr. Speaker. I should like, in conclusion, to ask my hon.. Friend whether he will have an inquiry and discussions with the Secretary of State for Industry, Trade and Regional Development to find out whether this aerodrome has some part to play in the industrial and general economic set-up of the area.

Mr. Marten: The answer to the first part of that question is "Yes" and the answer to the second part is that these are just the sort of factors that the local authorities should be taking into account and which, I would have thought, would have stimulated them into bidding for the airfield.

Sir William Strath

Mr. Frank Allaun: asked the Minister of Aviation if permission was sought by or given to Sir William Strath, who was Permanent Secretary of his Department in 1959–60, to become chair-man of British Aluminium Limited and joint managing director of Tube Investments Ltd. within a few months of leaving the Ministry.

Mr. Amery: Sir William Strath sought permission to take an appointments with the British Aluminium Co. Ltd., and Tube Investments Ltd. This was given in November, 1960.

Mr. Allaun: While certainly not suggesting that there was anything corrupt in this case, may I ask whether the right hon.. Gentleman does not think it highly undesirable that so many senior civil servants are leaving for firms which are contractors for the Government? Secondly, since Sir William held the top post at the time of the extraordinary Ferranti affair, will he be giving evidence to the Lang inquiry?

Mr. Amery: On the last point, I do not know whether Sir John Lang has called Sir William Strath: I shall certainly look into that and let the hon.. Gentleman know. I do not think it in the least undesirable that senior civil servants should go to industry, and I am ail for encouraging, as much as one can, the two-way traffic between industry

and the Civil Service. There is the example of Sir Arnold Hall, the present head of Hawker Siddeley and a former director of the R.A.E. at Farnborough. I am very anxious to see as much inter-change as possible between industry and the Government in these matters, because I think that the dangers of corruption are very small and the advantages of cross-fertilisation very great.

Mr. Leo: There is a point in what my hon.. Friend the Member for Salford, East (Mr. Frank Allaun) has said. Where we have an ex-Permanent Secretary going to a firm which is still working on contracts obtained during the period of his secretary ship, then, no matter what we may think here, it gives scope for all kinds of conjecture outside.

Mr. Amery: I take the point. I think that it is very important equally that a man's knowledge built up at the taxpayer's expense over years on a particular speciality such as aviation should not be loft to the aviation industry or the electronics industry as a whole.

Mr. Holt: Can the Minister say, when he talks about movements both ways, what person from industry has recently taken a top Civil Service job of a similar nature?

Mr. Amery: Sir Arnold Hall has been across the board. He was a director of the R.A.E. and he is now on the beard of Hawker Siddeley. We have many times in our history, particularly in war time, brought people from industry into the Government. I wish that we could find a way of doing this rather more. One of the things that I am trying to do in developments like the Chequers conference and the electronic; conference at Lancaster House is to try to get the experience of industry to bear more closely on Government problems. Another case is the Exports Council which S.B.A.C. has formed, I where both industry and the Civil Service are associated together. I want to foster this if I can.

Missiles (Contracts)

Mr. Frank Allaun: asked the Minister of Aviation why cost-plus con-tracts were undertaken for the three missiles Sea slug, Thunderbird and Fire-streak, which were originally estimated


To cost £8 millions and which were later estimated in the Auditor-General's report to have cost £110 millions, which resulted in the taxpayer bearing the extra cost, whereas a fixed-price contract was agreed on for the Bloodhound contract which gave Ferranti's a £4 millions profit.

Mr. Amery: The contracts for the development of the Bloodhound missile were on the same basis as those for the development of the Seaslug, Thunderbird and Firestreak missiles, namely cost plus.
The contracts for the production of the Bloodhound missile were on the same basis as the contracts for the production of Seaslug, Thunderbird and Firestreak, namely fixed price.

Mr. Allaun: Has not the result been that where there has been a colossal loss the taxpayers have had to bear it, but where there has been an excessive profit it has gone to the firm, so the public never get the benefit—they always lose?

Mr. Amery: I think that the hon. Gentleman should specify his charge if he is going to pursue it. I had the impression that his Question was put down on the misunderstanding that the contracts were placed differently for the Bloodhound than for the other three missiles. In fact, the contracts for the development of the Bloodhound were exactly on the same basis as those for the other three, and for the production exactly the same applies.

Mr. Shinwell: Can the right hon.. Gentleman say whether the figures mentioned in the Question are correct on the disparity between the original estimate and the actual cost?

Mr. Amery: I would not wish to mislead the right hon.. Gentleman. I should like to look into that more carefully I was under the impression that the Question was entirely misconceived and the assumptions false and that I tried to correct by explaining that the contracts were on the same basis and not on different bases. I would not wish to mislead the right hon.. Gentleman I will look into the question of individual figures and let him know. But they appear to be quotations from reputed sources.

Mr. Cronin: Is not the important question here that there should be no question of excessive profits on the part of the Bloodhound if proper precautions and proper alertness had taken place in the Ministry of Aviation?

Mr. Amery: As the hon.. Gentleman knows, Sir John Lang is conducting an inquiry, and I am naturally looking Departmentally at the problem myself to see whether any changes are required in our organisation. I should not wish to anticipate the outcome of these inquiries, but there will, no doubt, be an opportunity to discuss them.

Sir A. V. Harvey: Is my right hon. Friend aware that there are, of course, cases when firms take on fixed-price contracts and lose money? To overcome these great problems between the Government and industry, will he see if he cannot get closer to industry by attaching an accountant to each firm as liaison, so that there is a closer working arrangement with the firms and his Ministry? In this way many of the problems would be obviated and he would be kept closely informed of the progress, or lack of progress, being made financially.

Mr. Amery: I accept the spirit of the suggestion, and I shall do everything I can to keep in the closest possible touch with industry. Where fixed price contracts are concerned, that is a negotiating process and it is difficult to insure against miscalculation. I hope that Sir John Lang's inquiry and my own investigations at the moment may yield some fruit.

Private Firms (Contracts)

Mr. Lee: asked the Minister of Aviation if he will change the conditions of contracting between his Department and private firms to ensure that the outturn of each contract, and access to the relevant books of the firm, are available to his Department.

Mr. Amery: Such a condition is already included in contracts when the price is determined on actual cost.
It would be inappropriate in contracts let after competitive tendering.
The hon.. Gentleman's Question therefore arises only in respect of contracts


Let either after single tender or on the basis of what is called "price to be agreed".
The price-fixing arrangements in my Department are currently being re-viewed, and I would not wish at this stage to anticipate the outcome.

Mr. Lee: Would the right hon.. Gentleman agree that it is not a lot of use to condemn any firm which makes what we are pleased to call excessive profits unless we do all we can to prevent such things from happening? While he is issuing contracts, instead of merely confining himself to insisting upon the right to have a look at the factory while the thing is going through, why does he not also insist on the right to seethe outturn of any individual contract, so that at that stage he can ensure that this kind of excessive profit cannot be made?

Mr. Amery: I do not think that the hon.. Gentleman quite understood my Answer. Where contracts are priced on the basis of actual costs, this is what we do. There are two other methods, one the single-tender contract and the other competitive tender. When there is competitive tendering, what we try to do is to give the firm an opportunity to get a good profit by proving to be more efficient than other competitors who have tendered. In this case it would be inappropriate to try to check after the event. This proposition is quite different from a price fixed non-competitively. The hon.. Member's question arises where a single contractor is concerned, that is to say, when only one firm is allowed to tender because we are convinced that it is the only one appropriate; or where the prices are fixed after development has actually begun, or production has actually begun, which happens in certain cases I am now inquiring very closely into these price-fixing arrangements.

Mr. Lee: The right hon.. Gentleman will agree that in his Report the Comptroller and Auditor General speaks of 18 contracts put out to competitive tender when in each case only one firm tendered. In other words, the whole object which the right hon.. Gentleman has in mind is altogether vitiated by what is undoubtedly an agreement that only one firm should tender for the

contract. This means that there is no competitive: tendering, so that the right hon.. Gentleman's whole object cannot be achieved while that kind of thing goes on.

Mr. Amery: I was trying to say that where there is only one tender, if there is a single tender, then there is a problem. The hon.. Gentleman's question applies to single-tender contracts, as in the Ferranti case placed on the basis of what is called "price to be agreed". I am looking into these arrangements and I should not like to anticipate the outcome of my inquiries or those of Sir John Lang.

Fatal Accidents

Mr. Rankin: asked the Minister of Aviation if he will state the number of fatal accidents on scheduled and non-scheduled air services in the first quarter of 1964 with the comparable figures for 1962 and 1963; and how many British passengers and aircraft were involved in each case.

Mr. Marten: Figures for world-wide accidents are published by the International Civil Aviation Organisation but these do not yet extend beyond 1961. I will with permission circulate in the OFFICIAL REPORT the relevant information for British-registered aircraft.

Mr. Rankin: Is it not the case that in the first three months of this year 16 civil aircraft were destroyed with a loss of 360 passengers? Has the hon.. Gentle-man no information about these figures, which have: been published? If they are correct, are they disturbing him as seriously as they disturb all those who are interested in the progress of civil aviation? Is there any committee within the International Civil Aviation Organisation which inquires into these things from the point of view of the control system in airfields outside Great Britain?

Mr. Marten: In the International Civil Aviation Organisation there is a group of people compiling these figures, but I would be very reluctant to agree here and now to figures compiled by other sources which I could not necessarily accept as reliable.

Mr. Cronin: In view of the seriousness of the subject, would it not be more


Desirable for the Ministry to have figures much more up-to-date than any which we have heard so far?

Mr. Marten: If the hon.. Gentleman reads the Answer which will be circulated in the OFFICIAL REPORT, he will find that the figures give the answer and are very up to date.

Mr. Rankin: As the figures have been published by a responsible periodical, the current issue of The Aeroplane, would the hon.. Gentleman inquire into their veracity and write to me when he has done so?

Mr. Marten: Yes.

The information is as follows:


NUMBER OF BRITISH REGISTERED AIRCRAFT ENGAGED ON PUBLIC TRANSPORT FLIGHTS INVOLVED IN FATAL ACCIDENTS IN THE FIRST QUARTERS OF 1962, 1963 AND 1964 AND NUMBER OF BRITISH PASSENGERS INVOLVED IN EACH ACCIDENT.



Total Fatal Accidents
British Passengers involved



Total
Fatalities


1st Quarter, 1962


Scheduled …
0
0
0


Non-Scheduled
1
40
40


1st Quarter, 1963


Scheduled …
0
0
0


Non-Scheduled
0
0
0


1st Quarter, 1964


Scheduled
1
70
70


Non-Scheduled
1
4
4

Aircraft (Terrain Avoidance Systems)

Mr. Rankin: asked the Minister of Aviation what studies are being undertaken into the feasibility of terrain avoidance systems, with a view to reducing accidents involving civil transport aircraft.

Mr. Marten: Terrain avoidance equipment is being developed for military use and the possibility of civil application will be kept under review.

Mr. Rankin: Does not the hon.. Gentle-man worry about the fact that at the present stage of aviation development west ill cannot always fly over a hill in safety? Can he say what part the computer is playing in reducing the danger

Presented by high ground? Can he tell me why these safety devices can be built into military aircraft, such as the TSR2which has to fly at low levels, and yet not into civil aircraft?

Mr. Marten: The answer to the first question is that the best safeguards against collisions with high ground are good crew training, good crew discipline and procedures, and good navigational approach aids on the ground and in the aircraft. The equipments in the TSR2and so on are for terrain following and not precisely for terrain avoidance, which is of a lesser category. This is an entirely new art and we are early on in its development. That is why I said that we would keep it under review and that if we could apply it in the interests of the safety of civil aircraft, we would do so.

United States, Bahamas and Bermuda (Air Traffic)

Mr. Cronin: asked the Minister of Aviation what proportion of the air traffic from the United States to the Bahamas and Bermuda, respectively, is carried by British airlines.

Mr. Amery: In the last 12-month period for which figures are available, British airlines carried 31 per cent. of the air passenger traffic between the United States and Bermuda and 48 per cent. of that between the United States and the Bahamas.

Mr. Cronin: Is it not rather unsatisfactory that we should have such a comparatively small part of this lucrative, rich tourist trade? Has not the Minister been somewhat remiss about negotiating these traffic rights, particularly in the Bahamas?

Mr. Amery: On the contrary, I would have thought that it was remarkable that we should be able to carry this amount of traffic from the United States to the two Caribbean terminal points, considering the advantages which the United States would normally derive from having initiated a great part of the traffic.

Mr. Cronin: Does not the Minister negotiate these matters on a quid pro quo basis, as he does traffic rights with other countries? Why should we not have an equal share of the traffic rights with the United States?

Mr. Amery: We have done our best to secure the greatest possible share, and a large part of the traffic goes from this side of the Atlantic as well. However, a large part goes from the United States and it is very much to the credit of British operators that they have been able to carry so many American passengers to the Caribbean Islands.

Mr. F. M. Bennett: While endorsing everything that my right hon.. Friend has said, may I ask whether he does not think that more publicity could be given to the fact that on direct flights from this country to the Bahamas and to Bermuda no less than 25 per cent. can be saved if a British airline is used, a fact which is not sufficiently well known?

Mr. Amery: I hope that my hon.. Friend's question will be seized on, because he is quite right.

B.O.A.C.-Cunard (Traffic)

Mr. Cronin: asked the Minister of Aviation if he will publish the statistics available to him regarding the proportion of traffic carried by the British Overseas Airways Corporation-Cunard since it was formed in June, 1962, in comparison with that carried by other airlines operating on the same routes.

Mr. Amery: We have complete knowledge only of the traffic on these routes entering or leaving the United Kingdom Of this B.O.A.C.-Cunard has carried 44per cent. since June, 1962.

Mr. Cronin: May I ask the right hon.. Gentleman whether it is not the case that the B.O.A.C.-Cunard airline has done rather less favourably than its competitors on these routes? Is it not also the case that the B.O.A.C.-Cunard airline has been allowed to operate these routes only by surrendering valuable traffic rights to the Americans? Is my right hon.. Friend still satisfied that the merger has been justified by results so far?

Mr. Amery: The hon.. Gentleman began by asking whether it was not the fact that the B.O.A.C.-Cunard airline has done less well than its competitors. If it has carried 44 per cent. of the total traffic as against all competitors, I do not think that that is bad. The airline is competing against many foreign operators including those on its South

American route, and I do not think that the result is a bad one at all. It looks as though the financial results have been considerably improved, and I think that that is due in no small measure to the co-operation of the two great British transport undertakings involved.

Mr. Cronin: Nobody is saying that it is a bad result. Is it not a proportionately less satisfactory increase than the increase achieved by other airlines?

Mr. Amery: I would not have said so on the figures available to me. I am surprised that the hon.. Gentleman says so, because I thought that the complaint from the party opposite was that the B.O.A.C.-Cunard airline was creaming off the traffic. It has not been quite that way, but I do not think that this doing badly.

Oral Answers to Questions — BRITISH ARMY

Gurkhas

Sir J. Smyth: asked the Secretary State for Defence whether he will now announce measures to give a longer-term stability to Gurkha recruiting, both with regard to the policy of the recruitment of Gurkha ranks and of British officers for Gurkha regiments.

The Minister of Defence for the Army (Mr. James Ramsden): No, Sir. I do not think it is necessary to go beyond the announcement by my right hon.. Friend the then Minister of Defence on 20th November, 1963.

Sir J. Smyth: Does my right hon.. Friend realise that I find that reply very unsatisfactory? I was informed only the other day that the main stumbling block to the regular supply of British officers for the Gurkha Brigade was uncertainty with regard to recruiting, and that must be the same to a certain extent with regard to other ranks.

Mr. Ramsden: The present position is that we are able to recruit all the Gurkhas that we need. The Brigade is at present receiving its normal allocation of British officers from the Royal Military Academy, Sandhurst. I am sorry if there should be any uncertainty, but I think that the present position is clear. There will be no rundown for the time


being. I think that it would be wrong to try to anticipate what might happening the light of changes which might be made a long way ahead in the future.

Sir J. Smyth: Would not my right hon.. Friend agree that if a cut in British Army recruiting was announced, and then was not rescinded but only temporarily postponed, it would not have a very good effect on British recruiting? Gurkha recruiting is exactly the same.

Mr. Healey: Is it not the case that India is recruiting twice as many Gurkhas as we are? Can the Minister assure the House that he has not closed his mind to the possibility of making longer-term arrangements than those he has announced to the House?

Mr. Ramsden: This decision, and the suspension of the decision, has not caused any recruiting problem. Certainly it would be open to us to take any decision such as the hon.. Gentleman has suggested might be necessary in the light of changed circumstances, but I think that it would be unwise to start giving undertakings or answering hypothetical questions when we do not know what the circumstances may be.

Mr. F. M. Bennett: That is not good enough. Not long ago we were being told that there should be more encouragement to recruit for the Gurkhas. A little later my right hon. and gallant Friend the Member for Norwood (Sir J. Smyth), myself, and others, were being told that there was to be a rundown. Still later we were told that it was to be suspended and there was not to be a rundown. Does my right hon.. Friend realise that there is considerable competition for these troops, unfortunately not only from friends but from enemies as well, and that there is a great deal in the suggestion that some more permanent arrangement should be announced?

Mr. Ramsden: We do not expect any difficulty in recruiting all the Gurkhas we need. We aim to recruit 600 this year, including 50 boys.

Royal Ordnance Factory, Swynnerton (Site)

Mr. Swingler: asked the Secretary of State for Defence when he will announce the result of his consultations

with the local planning authority about the disposal of the site of the Royal Ordnance Factory, Swynnerton.

The Under-Secretary of State for Defence for the Army (Mr. Peter Kirk): I have asked the county council for an early answer and I will announce the result of our consultations as soon as I am able to do so.
I understand that the county council's planning sub-committee has discussed the future of the former Royal Ordnance factory site with the Stone Rural District Council on 6th April, and that it now awaits the formal views of the rural district council.

Mr. Swingler: May I ask the hon.. Gentleman whether he is aware that all those acquainted with the problem remain disgusted with the long delay—it is now nearly seven years since the factory was closed—in dealing with it? Is the hon.. Gentleman also aware that hope springs eternal in Staffordshire, especially as a result of the great Labour victory there last week? As he now has a better planning authority with which to deal, we hope that he will be able to make a statement at an early date.

Mr. Kirk: Hope springs eternal in the Ministry of Defence as well, and I think that we are making some progress.

Territorial Army Pay (Income Tax)

Mr. Swingler: asked the Secretary of State for Defence what representations he has received from Territorial Army Associations about the levying of Income Tax on Territorial Army pay several years in arrears; and if he will consult the Chancellor of the Exchequer about the alleviation of cases of hardship and the devising of a more equitable system of levying tax from Territorial Army soldiers.

Mr. Ramsden: None, but if the hon.. Gentleman will let me have details of the cases about which he wrote to me in general terms on 5th April, I will look into them with my right hon.. Friend the Chancellor of the Exchequer.

Mr. Swingler: Has the right hon.. Gentleman had previous complaints of this character? Is he aware that some Territorial Army units at the moment


are extremely disturbed because their members are receiving tax demands as much as five or even seven years in arrears? It seems that the system is extraordinarily inefficient, and is bound to create hardship. I will certainly supply the right hon.. Gentleman with details. Will he investigate the matter carefully with the Treasury?

Mr. Ramsden: Until 1957 it was left entirely to the individual to assess and declare his Territorial Army pay on his annual tax return. If this were not done by any individual—as might happen, perhaps, in civilian life in some cases—the Inland Revenue is within its right sin submitting demands. But since 1958 Army paymasters have helped individuals by informing them of their total taxable Territorial Army emoluments, and if an individual declares these on his annual return, tax can be recovered by adjusting the tax code for the next year in the normal way, which is a better way of dealing with the matter.

Oral Answers to Questions — DEFENCE

United Nations Force, Cyprus (British Contingent)

Mr. Shinwell: asked the Secretary of State for Defence how many British troops are to remain in Cyprus under the control of the United Nations; and for how long they will be retained in the island.

The Secretary of State for Defence (Mr. Peter Thorneycroft): We have undertaken to provide if necessary up to half of a United Nations force of 7,000 men. The Secretary-General is however seeking to obtain larger contingents from other countries. If, as we all hope, he is successful this will enable us to withdraw troops from the British contingent. The Security Council Resolution of 4th March gives the United Nations force a three months' mandate.

Mr. Shinwell: But on the assumption, which appears to be well founded, that the Greek Cypriot forces are now in almost overwhelming strength compared with the United Nations force, does not the right hon.. Gentleman think that we are reaching the point when we must leave it to the Greek Cypriots and the Turks to maintain order without the aid of our troops? Is it not likely that either

our troops will be humiliated by the opposing strength of the other forces, or they will be liquidated?

Mr. Thorneycroft: However the future may turn out, I think that it has been with the general approval of the House, and certainly of the party opposite, that we have made our contributions to the United Nations force. In answer to this Question, I have said what that obligation is, that it is half of 7,000, but we may, and we all hope that we will, be able to reduce it as the other contingents are increased.

Mr. Shinwell: Is it not obvious that there has been a change in the situation? When the United Nations decided to make a contribution, to which we have added our quota, it was not anticipated that the Greek Cypriots would build up a force of 30,000 men. In those circumstances, dots not the right hon.. Gentleman think oat the matter requires reconsideration?

Mr. Thorneycroft: With respect to the right hon.. Gentleman, he is really asking me a much wider question than that on the Order Paper. He is asking whether the United Nations should be there, or should stay there in the future. If things turn out well, there may be no need for the force, and in those circumstances we shall not contribute to it.

Dame Irene Ward: May I ask my right hon.. Friend why the United Nations should continue to rely on what Great Britain has done in Cyprus? Why should not we get on a bit more and get a bit more support from those who are attached, and committed, to the United Nations? We ought to be a bit tough with the United Nations, not with our forces.

Mr. Thorneycroft: I have said that the Secretary-General is seeking to get increased contributions from other nations contributing to this force. I think that it is the wish of the House that he should be successful in that, so that our liability may in some measure be reduced.

Mr. Lubbock: Will the right hon.. Gentleman explain to his hon.. Friend that one of the principal difficulties in building up a United Nations force in the island is the refusal of Archbishop


Makarios to accept contributions from a great many countries, including all those in Africa?

Mr. Thorneycroft: No doubt there have been difficulties in building up the United Nations force, but no one can say that we have contributed to them We have done our best all the way through.

Mr. Shinwell: That is the point.

Mr. Driberg: asked the Secretary of State for Defence (1) if he will introduce a special United Nations allowance for British forces serving under united Nations command in Cyprus;
(2) if, for the information of hon.. Members, he will publish in HANSARD a table showing the rates of pay and allowances drawn by members of the various national forces serving in Cyprus under United Nations command.

Mr. Paget: asked the Secretary of State for Defence if he will make a statement on the pay receivable by members of Her Majesty's Forces serving under United Nations command.

Mr. Thorneycroft: I should perhaps make it plain that the United Nations are neither paying nor making any allowance to any of the forces now in Cyprus Each contributing nation is paying it sown forces, and the rates naturally differ in this as in any other theatre where troops of different nations are serving. Members of Her Majesty's Forces receive the same basic scales of pay wherever they are serving. In addition, those serving outside the United Kingdom receive a local overseas allowance designed to give the serviceman the same purchasing power as his pay would provide in the United Kingdom. It is not easy or perhaps possible to make exact comparisons regarding total emoluments of other forces serving in Cyprus. All of them, however, are receiving certain additional allowances and I am circulating a note of these so far as they are known in the OFFICIAL REPORT. I have considered carefully whether any special allowance should be paid to British troops in Cyprus in addition to the normal over-seas allowance but I feel bound to tell the House that I do see considerable difficulties in adopting such a course Unlike some of the other contingents, a

High proportion of British forces normally serve overseas. For example, over 50 per cent. Of the Army is at present outside the United Kingdom. I am sure the House will realise the difficulties of distinguishing between Cyprus and overseas theatres such as Borneo, where conditions are no less arduous, or even between men in Cyprus, some of whom are serving with the United Nations and some inside the Sovereign Base areas.

Mr. Driberg: Is the right hon.. Gentle-man aware that the argument that he has just used is not entirely valid, since British troops serving overseas in other theatres retain a sole allegiance which, in the case of Cyprus, has been temporarily merged in a new allegiance to the United Nations? Would it not therefore be an act of simple justice to bring the pay and allowances of our troops there up to the level of the highest in the United Nations forces, preferably at the expense of the United Nations?

Mr. Thorneycroft: I am not saying that I find this at all easy. I concede that it is not an easy thing to answer. It is certainly not a simple matter, which ever way judgment is made. But what has influenced my mind is the fact that we have so many soldiers overseas, in so many different theatres, that it is difficult to start distinguishing between them. Although arguments may be advanced on the other side, this must be the decisive one.

Commander Courtney: Is it not a fact that the extra allowances paid by smaller nations to their armies are a kind of premium for United Nations service? Are not these forces becoming something in the nature of United Nations mercenaries? Therefore, is it not right that British forces should be paid such premiums, preferably out of United Nations funds?

Mr. Thorneycroft: As we advance, other arrangements may be devised about United Nations forces. Logically I suppose that these troops should be formed in a way in which everybody contributed to a common pool, and then all the forces would be paid the same—perhaps a fairly high rate. We have not got to that stage yet, and I have to deal with the situation as it is today. As it is today, I think that this is the right answer.

Mr. Healey: I recognise the validity of many of the arguments that the right hon.. Gentleman has used, but does not he agree that there is some discontent—I do not think that that is too high a word to use—among British forces serving in Cyprus at what appears to them to be inferior conditions of pay compared with those of some other forces serving under the United Nations? If he feels that it is impossible to make a unilateral British decision in this matter, will he ask the Foreign Secretary to raise this matter in New York, and see whether it is not possible to organise, through the United Nations, a standard rate of pay for all forces serving under United Nations command?

Mr. Thorneycroft: All these suggestions merit consideration for the future. It may be that we shall see in the world numbers of examples of troops acting in this way. But I have to deal with the situation as it is, and I think that it would be wrong for me to hold out any prospect of being able to adjust the matter in this instance. At the moment my thoughts are rather based on the possibility of withdrawing some of our contingent as other forces are increased.

Following is the information:
According to present information the following are the weekly rates of additional allowances paid to contingents in Cyprus by their national Governments

£
s.
d.


Republic of Ireland
5
5
0


Canada
5
8
3


Finland
3
18
0


Sweden
7
0
0

These are the rates for unmarried private soldiers. Details of rates paid to other rank sand married men are not available.

In assessing the comparative value of the emoluments of the various contingents, it is necessary to take into account their conditions of service as a whole, including scales of basic pay and other allowances, deductions for pensions and national insurance and the cost of living in their home countries.

Oral Answers to Questions — ROYAL AIR FORCE

Belfast Aircraft

Mr. Lubbock: asked the Secretary of State for Defence what estimate has been made of the further requirements for Short Belfast aircraft that

would be needed to enable Her Majesty's Government to provide the logistic support for a United Nations peace-keeping force, as at present being considered

The Minister of Defence for the Royal Air Force (Mr. Hugh Fraser): None, Sir. No R.A.F. requirement for extra Belfast aircraft is foreseen.

Mr. Lubbock: The Under-Secretary of State for Foreign Affairs said, on 21st March, that they were looking into the Scandinavian suggestion that some assistance to the United Nations peacekeeping force on the logistic side was being investigated by the Government Would not this be a suitable way of tying in that investigation with the assistance that we hope will be given to the Northern Ireland employment situation by a further order for Belfasts?

Mr. Fraser: I congratulate the hon.. Member on his ingenious way of raising the question of the interests of Northern Ireland. We have given, and are continuing to give, a good deal of logistic support to the United Nations. We have done so in the Congo and in many other peace-keeping operations in the last few months.

Sir Knox Cunningham: Will my hon.. Friend bear in mind that a new jet engined type of Belfast aircraft can be developed to give an improved performance? Will he consider ordering such a type of aircraft for our own use?

Mr. Fraser: No, Sir—not at the moment. We have a good Transport Command. We are getting better air-craft and I, personally, foresee no immediate need of any such aircraft.

Mr. Mulley: Is the hon.. Gentleman satisfied with the extent of our strategic freighter capabilities? As I understand it, until the Belfast arrives they are zero. Not only would this have assisted us in our United Nations obligation, but it would have helped in moving troops to Cyprus and East Africa if we had had some freighter capabilities.

Mr. Fraser: We have managed. I have given the House remarkable figures of the freight and people that we have been able to move in the last few months with Transport Command as at present


constituted. Undoubtedly it will be greatly improved when the Belfasts and the VC10s are in operation.

V-Bomber Force

Mr. Mulley: asked the Secretary of State for Defence if he will make a further statement about plans to develop a low-level capability for the V-bomber force.

Mr. H. Fraser: General trials and development to improve even further the low-level capability of the V-force are progressing satisfactorily. Otherwise, I have nothing to add to what I said during the recent Defence and Air Estimates debates.

Mr. Mulley: Are we to understand from the Minister's Answer that he claims that the V-bomber force already has low-level capability? If not, when does he estimate that it will be avail-able? Is he now able to tell us some-thing about the cost involved in adapting the aircraft and training the men? Is this cost covered by the Estimates that he presented to Parliament a little while ago?

Mr. Fraser: The capability already exists, but there are areas in which we could improve it, and that we are doing The costs are covered by the Estimates which have been presented.

Mr. Lubbock: Can the hon.. Gentle-man say what difference this makes to the life of the aircraft concerned? How many hours will it be capable of flying at these low altitudes?

Mr. Fraser: All I can say is that on present training schedules it will be able to carry on well into the 1970s.

Oral Answers to Questions — SCOTLAND

Prisoners, Peterhead (Wounds)

Mr. Hector Hughes: asked the Secretary of State for Scotland if he will make a statement on the case of William McCann, who was taken to and is now in Aberdeen Royal Infirmary after having been stabbed in Peterhead Prison; and what investigation he has made into this breach of prison regulations.

The Under-Secretary of State for Scotland (Mr. Gordon Campbell): On 4th April William McCann and another

prisoner in Peterhead prison were found to be suffering from wounds. The police were called in immediately and have reported to the procurator fiscal, who has decided not to institute proceedings Both men have recovered and have returned to work.

Mr. Hughes: Is this a case of gang warfare? Did the authorities know of the difficulties between these prisoners before the affray and, if so, what steps did they take to avoid it? Is not it a fact that the unsatisfactory structure of our prisons makes this kind of thing possible? What steps is the Secretary of State taking to improve the structure so as to separate prisoners where there are known cases of gang antagonism?

Mr. Campbell: The governor is investigating the question of how these prisoners gained possession of the means to injure each other, and my right hon.. Friend is awaiting his report. The prisoners concerned were members of a group selected for special privileges, including the freedom to move in the prison hall without continuous supervision. The record of this prison is good and these incidents have been few.

Local Authorities (Housing)

Mr. Hector Hughes: asked the Secretary of State for Scotland how many local authorities in Scotland have no houses under construction; which they are; what are the reasons for this lack of building; and what steps he has taken, or proposes to take, to assist such local authorities to extend and implement their house building plans.

Mr. G. Campbell: At the end of March, 84 local authorities had no houses under construction, 17 of these authorities had tenders approved for houses which they were about to start. I shall, with permission, circulate the names of the remaining 67 authorities in the OFFICIAL REPORT. About half of these 67 authorities had proposals in hand to resume building; some have said that they have no need to build further houses at present, and four that they are not building for financial reasons. My right hon.. Friend is always willing to help but it is for the authorities, in the first place, to decide whether they need to build more houses.

Mr. Hughes: Is not the answer in respect of those local authorities which


have not built many houses, and is not it a fact that high interest rates deter some local authorities from carrying out their obligations relating to housing? What steps is the Secretary of State taking to rectify this by the provision of lower interest rates or otherwise?

Mr. Campbell: Of the 67 authorities, 62 were small burghs which in any case build only from time to time. There is no evidence that local authorities in general cannot afford to build houses which they need because of high interest rates, and the 43,000 local authority houses now under construction is certainly not evidence of this.

Following is the information:


Counties
Burghs—cont.


Caithness.
Innerleithen.


Kirkcudbright.
Inveraray


Orkney.
Inverbervie.


Peebles.
Kirkcudbright.


Zetland.
Kirkwall.



Lady bank.


Burghs
Lanark


Abernethy.
Langholm.


Alyth.
Lauder.


Auchterarder.
Laurencekirk.


Ballater.
Lochgilphead.


Burghead.
Lochmaben.


Castle Douglas.
Lossiemouth.


Cove &amp; Kilcreggan.
Markinch.


Crail.
Melrose.


Crieff.
Millport.


Cromarty.
Moffat.


Cullen.
Newburgh.


Culross.
New Galloway.


Dollar.
Newport.


Dornoch.
Newton Stewart.


Doune.
Old Meldrum.


Dunblane.
Peebles.


Dunoon.
Pitlochry.


Duns.
Pittenweem.


East Kilbride*.
Portknockie.


East Linton.
Portsoy.


Elie.
St. Monance.


Ellon.
Sanquhar.


Eyemouth.
Stanraer.


Falkland.
Tain.


Findochty.
Tobermory.


Fort William.
Whithorn.


Gatehouse.
Wigtown.


Grantown-on-Spey.

*Public sector housing in the burgh is at present provided by the East Kilbride New Town Development Corporation

School Dental Service

Mr. Manuel: asked the Secretary of State for Scotland what was the number of dentists employed in the School Dental Service, and the number of children examined during 1963 in relation to the total school population.

Mr. G. Campbell: There were 192 dentists in the School Dental Service in

1963, and they examined some 46 per cent of the total school population. This is in addition to children who had their teeth examined by the general dental service.

Mr. Manuel: The Under-Secretary of State does not indicate how many children were examined under the general dental service. Is not it time to take positive action to bring the School Dental Service up to strength? Is not he aware that there is a great deal of ignorance concerning the care and treatment available for children under 21 under the general dental service? Will he publicise what treatment may be given in that way and so relieve the pressure on the School Dental Service? Is not it obvious that the Scottish Office ought to be doing something more to enlarge the School Dental Service?

Mr. Campbell: There are three points in the hon.. Gentleman's supplementary question and the first I can answer straight away Last year 47 per cent of the school population received dental treatment through the general dental service. In order to achieve what the hon.. Gentleman wishes, we should need to attract more dentists to the School Dental Service. There have been three dental service campaigns recently, and my right hon.. Friend is doing all he can in this direction.

Mr. Ross: Have the Government made any estimate of how many more dentists are needed? Will the hon.. Gentleman bear in mind that this was one of the reasons given by the Government more than 10 years ago for the changes made in respect of the dental section of the National Health Service? Why, after all these years, have we still a completely inadequate School Dental Service?

Mr. Campbell: Recent figures show an improvement, but we are still some way short of what would be a comprehensive system. Last year, in conjunction with local authority associations my right hon.. Friend's Department issued a report which suggested improvements in the conditions of service aimed at allowing dentists to spend more time on work at the chair.

Flood Prevention (Scotland) Act, 1961

Mr. Manuel: asked the Secretary of State for Scotland how many schemes have been made by local authorities arising from the provisions of the Flood Prevention (Scotland) Act, 1961; and how many schemes he has confirmed.

Mr. G. Campbell: Nine have been made. Seven of these have been confirmed, and the other two are at present going through the normal statutory procedure.

Mr. Manuel: Is the Joint Under-Secretary of State aware that there is much loss of good arable land because of periodic flooding in many parts of Scotland? Is he further aware that this flooding also destroys many crops and agricultural buildings? Will he do what he can to persuade local authorities to carry out the provisions of the 1961 Act so that land may be reclaimed?

Mr. Campbell: I think that the hon. Member will recall—we both served on the Standing Committee which deal with the Bill which became the 1961 Act—that the Act refers to non-agricultural land. On this land schemes may be made. This is permissive, and I have no reason to believe that local authorities are not doing all they should in this direction.

North of Scotland Hydro-Electric Board (Sporting Rights)

Mr. Millan: asked the Secretary of State for Scotland on what basis compensation is paid by the North of Scotland Hydro-Electric Board for loss of sporting rights; and what is the total sum paid by the Board from its inception to date.

Mr. G. Campbell: Sporting rights acquired by the Board, or injuriously affected by the Board's operations, rank for compensation under the normal statutory code incorporated in the Land Clauses (Scotland) Act and related legislation. The Board has informed my right hon.. Friend that detailed examination of several thousand individual cases would be needed to ascertain the total sum exactly; but it estimates that of the £1·4 million paid for land and compensation in respect of its generating schemes,

about one-half may be in respect of sporting rights.

Mr. Millan: Is not the figure extremely high? Is the Minister aware that many Highland landowners are far more interested in maintaining the north of Scotland as a huge sporting estate than in having hydro-electric development, or any kind of economic development in the Highlands? When are the Government going to get tough with these landowners and stop allowing them to dictate Government policy towards hydro-electric development?

Mr. Campbell: I do not think this a high figure for a period of about 20years. I know that it is less than 1 per cent. of the Board's capital expenditure on generation. Most of the land concerned is not of high value.

Mr. Vane: Is not it true that the value of the sporting rights in Scotland contributes greatly to the attraction of the country to tourists? As an Englishman,have not I been led to believe that the possibilities of tourism in Scotland is one of the principal features of the economy?

Mr. Campbell: I confirm that fishing in particular is a very valuable tourist amenity and that the rates from fishing also contribute to the assets of the local authorities.

Old People (Welfare Services)

Mr. Hannan: asked the Secretary of State for Scotland if he will initiate consultations between the Scottish Home and Health Department and local authorities for the purpose of creating at an early date a unified and comprehensive welfare service for the care of old people.

Mr. G. Campbell: My right hon.. Friend wants the services for old people to be as comprehensive as possible, and his Department is constantly in touch with local authorities about means of improving them. But I am not sure that these services would operate more effectively if they were separated from the similar services provided for the rest of the community.

Mr. Hannan: Is the hon.. Member aware that at a very well attended conference in Scotland of local authorities recently


One of the prominent doctors there insisted that these services could be better looked after if an initiative were to come from the Department? Will the hon. Member reconsider this matter?

Mr. Campbell: I am aware of the statement to which the hon.. Member refers. It was an important and interesting statement. None the less, my right hon.. Friend is conscious of the many different services which are required by elderly people, and he still feels that this is best done by the Departments concerned with similar services provided for the rest of the community.

Mr. Ross: The hon.. Member must be aware that where there is overlapping and duplication there tend also to be gaps, with some institutions thinking that the service has been covered by other people. Will he look into this again, because what is required is a unified service in respect of the welfare of the old.

Mr. Campbell: I agree with the hon.. Member that we do not want duplication or gaps, but my right hon.. Friend thinks that under the system which he prefers it is most unlikely that these will occur.

LONDON BUS CREWS (PAY AND CONDITIONS)

The following Question stood upon the Order Paper:

Mr. WEBSTER: To ask the Minister of Transport, if he will make a statement about the Report of the Committee of Inquiry into the pay and conditions of London bus crews.

The Minister of Transport (Mr. Ernest Marples): With your permission, Mr. Speaker, and that of the House I will now answer Question No. 48.
The Committee's interim Report was published on 16th December, 1963. In accordance with proposals in that Report, the London Transport Board immediately offered wage increases ranging from 8s. 6d. to 15s. a week to bus drivers and conductors with effect from 19thDecember, 1963. These were accepted by the Transport and General Workers' Union
The Committee's final Report is being published this afternoon. Copies have

been placed in the Library and the Vote Office. The Government would like to express their thanks to Professor Phelps Brown and his colleagues.
The Report analyses in detail the problem and prospects of the London bus service and recommends that the Board and the union should negotiate a comprehensive agreement for a term of years providing for improvements in pay and conditions as well as measures for increasing the efficiency of the service.
The Report also makes a broad assessment of the cost of the improvements discussed by the Committee. It regards some rise in fares as the unavoidable price to be paid for an adequate service. But it stresses that it is the duty and interest of both the Board and the union to keep the rise in costs as low as possible, and also to increase receipts by making the service more attractive.
Considering the national interest, the Committee emphasises that its conclusions had sole regard to the special circumstances the employment of busmen in London and to the fact that an adequate public transport system in London is essential to meet the problem of increasing traffic congestion. It is for these reasons the Committee recommends what it describes as "a non-recurrent adjustment" of the position of bus crews in the London wage structure.
The Committee points out that the future of the London bus services now rests in the hands of the Board and the union. It stresses that both parties must be ready to examine and experiment with new methods and to adopt them. The Government strongly support this view. We accept that in London there is a special case for improving pay and conditions for busmen. But there is likewise a special need for improving service to the public. The public has a right to expect the two to go hand in hand. The Government therefore expect both parties in the negotiations to recognise this and to reach a settlement that will ensure the efficient and economical service which is essential in the public interest.
The Committee's Report has been sent to the Board and to the union.

Mr. Webster: Is my right hon.. Friend satisfied that this Report will produce


a more efficient service for the public of London? In this respect, does he envisage that there is likely to be increased development of one-man buses and larger buses in that the 40-hour week, the three days' extra holiday and the extra pay for Sunday working must surely be taken into account? Would he say whether one of the major recommendations of the Report is the elimination of the fuel duty, which costs £4·7 million in London and £25 million for bus services outside London?

Mr. Marples: The question of fuel duty is one for my right hon.. Friend the Chancellor of the Exchequer, not for me.
As for the efficiency of London bus services, one thing is crystal clear: the Report lays it firmly as a duty on the Board and the union that they must get together and have detailed negotiations as to how they can make the service more efficient, more attractive and cheaper to the general public. I think that the whole House will be behind me when I say that I hope that the Board and the union will get together and hammer this problem out, and, at any rate, accept some innovations to make the service more attractive.

Mr. Strauss: We, too, welcome the Report. Does not the Minister agree that it is a vindication of the attitude long taken by the union and by others who have been concerned about the efficiency of the bus service in London?
Is the right hon.. Gentleman aware that we fully endorse the hope expressed in the Report, and mentioned by the Minister, that, as a result of the more favourable climate which may be brought about by the implementation of the ideas in the Report, we in London may get a more efficient bus service and that there will be better co-operation in the future between the Board and the union in experimentation with new methods and in all methods which may bring about a better service for the people of London?

Mr. Marples: The Report gives the men an extremely fair and reasonable

deal, and it is up to them and the Board to produce something for the public of London. I sincerely echo the right hon.. Gentleman's hope that the Board and the union will do just that.

Mr. D. Smith: Is my right hon.. Friend aware that the members of the traveling public in London will welcome this statement, particularly in relation to the fact that a real effort will be made to match wage awards to a better service? London transport users have been crying out for this improved service for a long time. Will my right hon.. Friend make quite sure that there is, in fact, a genuine effort on both sides and not merely lip-service, as has been the case in the past?

Mr. Marples: I hope that that will be the case, and I can promise both the Board and the union that, through the London Traffic Management Unit, we shall do all in our power to help buses to achieve a higher average speed than has been the case for some time in the past. We have often made special provision for buses to go against a one-way street for example, to provide a better service. We are willing to extend such facilities if the Board and the union will get together.

Mr. Mellish: Is it not a fact that the Minister's personal responsibility cannot be ignored and that unless something is done about traffic inside London it is hopeless to have any genuine schedules for buses? Is it not against that background that he must accept some responsibility? Is he aware that at least some of us feel that the time has passed when the Government should accept some responsibility for finance here? We cannot run this public service on the basis of profit and loss, and until the Government are prepared to do something about this they will get into further trouble. Will he do something about it?

Mr. Marples: The Report makes no recommendation about a subsidy. If the hon.. Member reads the Report carefully he will see that in paragraphs 30 to 32 it points out that the average scheduled speeds of central buses on week-days have risen, due to schemes introduced by the present Government.

BALLOT FOR NOTICES OF MOTIONS

Education

Sir C. Taylor: I beg to give notice that on Friday, 1st May, I shall call attention to education, and move a Resolution.

Housing, Central London

Mr. G. Johnson Smith: I beg to give notice that on Friday, 1st May, I shall call attention to the housing situation in central London, and move a Resolution.

Occupational Health Service

Mr. Whitlock: I beg to give notice that on Friday, 1st May, I shall call attention to the case for an occupational health service, and more a resolution.

BILL PRESENTED

SUNDAY OBSERVANCE

Bill to amend the Sunday Observance Act 1625 so as to permit the playing of games outside parish boundaries on Sunday, presented by Sir John Barlow; read the First time, to be read a Second time upon Friday, 12th June, and to be printed. [Bill 127.]

PUBLIC SERVICE VEHICLES (TRAVEL CONCESSIONS) ACT 1955 (AMENDMENT)

Mr. Edward Short: I beg to move,
That leave be given to bring in a Bill to make further provision with respect to the allowing of free travel or reduced fares on public service vehicles run by local authorities; and for purposes connected therewith.
I believe that the case for this small amendment to the law is very well-known to the House. Therefore, I will take only a few minutes to go over the facts again. I am glad to see the Minister of Trans-port here, I, because I do not think that he has ever really understood what this is all about.
It is one of the minor mysteries of this Government s period in office that they have not made this small change in the law. Indeed, their continual refusal to do anything about it is one of the meanest decisions they have taken in their whole 12 years, because this matter involves a miserable amount of hard-ship to millions of people—old people, blind people and disabled people—in all the big towns and cities in England, Wales and Scotland.
I have estimated that the Government's refusal to tare any action in this matter is costing pensioners in my area between 2s. and 3s. a week. That is the equivalent of about 17s. or 18s. a week on a Member of Parliament's gross salary and £5on the Prime Minister's salary, so it is a matter of some importance to these old people.
The facts are these. Ninety-six local authorities, mainly big towns, have their own transport undertakings and through-out the whale of this century—indeed, way back into the last century—they gave concessionary fares—sometimes cheap fares; sometimes free passes—to certain categories of people—pensioners, disabled people and blind people.
This went on quite happily, and no-body objected to it, until 1954, when a gentleman in Birmingham, named Prescott, wert to the Chancery Division of the High Court and obtained a declaration from the court that Birmingham's concessionary fares to pensioners were ultra viresthe corporation and,


therefore, illegal. I think that it was bad law, but, whether it was bad law or good law, only this House can change it.
There were two alternatives before local authorities after that decision. One alternative was to wind up their concessionary schemes, which they did not want to do. The other alternative was for the whole 96 local authorities to introduce Private Bills to get this specific power. To save that colossal waste of public money, as well as to save the burden which that would have placed upon the House, I myself introduced a Private Member's Bill which would have given them the power which they assumed they had until Mr. Prescott intervened.
When the May, 1955, General Election came along the then Prime Minister, Mr. Anthon.y Eden, sent for me. In his room in the House he told me that he would allow this and one other Private Member's Bill to reach the Statute Book and that the Government would give Government time for it. When we got upstairs in Standing Committee, we discovered the catch in it, because the Government amended my Bill so that, instead of it giving the local authorities the power which they always assumed that they had, all it did, after it was amended, was to legalise the concessions which existed on the day on which Mr. Prescott intervened.
We warned the Minister—it was not this Minister then; it was another one, but this Minister was then in the Government, so he is equally responsible—that this would be all right for the moment, but that after a very short time it would create chaos throughout the country.
This has happened for a number of reasons. First, many local authorities have changed their vehicles—from trams to trolley buses and then to diesel buses. When the vehicle is changed the concession is extinguished.
Secondly, every town in the country has built new housing estates since 1954, in many cases around the periphery of the towns, in many cases miles from the towns. They have had to extend old routes and lay on new routes. A new route which has come into existence since 1954 cannot carry any concessions. We have got the quite ridiculous situation now where an

Old-age pensioner can have a concession on half a route but not on the other half. It is absolutely fantastic.
Thirdly, some local authorities defined the category of people who could get concessions by reference to income. Incomes have changed in 10 years and this criterion is now out of date. Other local authorities, like my own, had the words "resident within the borough ". Thousands of our people are now resident outside the borough, and, therefore, they are ruled out. So there is real distress and hardship and a real sense of grievance in almost every big town and city about this at present.
Over the last few years, efforts have been made to change this. First, I myself have introduced a Bill to do this on a number of occasions. It has come up in the House on Friday after Friday and it has always been objected to by one or more hon.. Members opposite. We have now got a General Election in the offing, and I think that it would be much more hon.est if hon.. Members opposite who object to it now would call a Division and stand up and be counted, instead of mumbling an anonymous "Object" on a Friday afternoon.
Secondly, many local authorities—between 20 and 30—have inserted Clauses in their Private Bills in the last 10 years to get this power. In every single case, on the instructions of the Ministry of Transport, or at the request of the Ministry of Transport, the Clause has been deleted. In one case, it got through this House and at this Minister's request it was deleted in the other place.
Thirdly, a large number of national bodies have written to the Minister of Transport and to the Prime Minister, including the Scottish T.U.C., the National Federation of Townswomen's Guilds, and the National Federation of Old Age Pensions Associations. In every case, they have got a refusal without any reason being given at all.
Fourthly, I tabled a Question on 17th July last year and the hon.. Member for Newcastle-upon-Tyne, East (Mr. Montgomery) tabled a Question on 23rd March of this year. We received identical replies. The Minister said, "I cannot pledge the Government to amend this Act ". More hon.est language would have been, "No, Sir".
We have tried everything we know to get the Government to change the 1955 Act. Now they have decided to extend their life by six months, and they will be very hard put to fill up the 40 or 50 Parliamentary days. On behalf of my right hon.. and hon.. Friends, I want to say that if the Government will give a little Government time for this Bill we will cooperate to get it, or a similar Bill, if this one is not properly drafted, through within a few hours.
If the Government will not do this and they force this hardship on old, blind and disabled people to continue for another six months, I want to make it quite clear—my right hon.. Friend the Leader of the Opposition has authorised me to say this—that this or a similar Bill will be one of the first Bills that the Labour Government will put through when they come into power.
I sincerely hope that the Government will not make these old people wait for six months. If they care to do this next week or the week after, we will co-operate to help get this through

Question put and agreed to.

Bill ordered to be brought in by Mr. Short, Miss Bacon, Mrs. Braddock, Mr. McBride, Mr. Monslow, Mr. Popplewell, Mr. G. Thomas, and Mr. Willis.

PUBLIC SERVICE VEHICLES (TRAVEL CON- CESSIONS) ACT, 1955 (AMENDMENT)

Bill to make further provision with respect to the allowing of free travel or reduced fares on public service vehicles run by local authorities; and for purposes connected therewith, presented accordingly and read the First time to be read a Second time on Friday, 24th April, and to be printed. [Bill 128.]

Orders of the Day — WAYS AND MEANS

Considered in Committee [Progress, 14th April]

[Sir WILLIAM ANSTRUTHER-GRAY in the chair]

Orders of the Day — AMENDMENT OF THE LAW

Question again proposed,
That it is expedient to amend the law with respect to the national debt and the public revenue and to make further provision in connection with finance, so, however, that this Resolution shall not extend to making amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description, or for all goods to which any of the several rates of tax at present applies

Orders of the Day — BUDGET RESOLUTIONS AND ECONOMIC SITUATION

3.49 p.m.

Mr. Robert Cooke: I have no dot but that the hon.. Member for Cardiff, South-East (Mr. Callaghan) would be lighted if I were to conclude the 50-minute speech which I had hardly begun when the Committee reported Progress last night. It might leave the hon.. Gentle man short of time and spare him the agony of spinning out those meagre criticisms which, no doubt, he will have to make of a really quite reasonable Budget.
However, I have no wish whatever to detain the Committee from hearing about the complete lack of financial policies of ton. Members opposite, and I am very happy to give way to him.

3.50 p.m.

Mr. Jams Callaghan: I am deeply obliged for the courtesy that has been extended to me by the hon.. Gentleman the Member for Bristol, West (Mr. Robert Cooke), but not 'or the sentiments which preceded it.
The right hon.. Gentleman the Chancellor of the Exchequer ended his speech yesterday with an astonishing invitation. He invited the Committee to consider not his Budget, which he had spent 90 minutes delivering, but instead that any


hon.. Member who had criticisms to make should make his own proposals clear so that the country could judge. I suppose that there are not many occasions when a Chancellor has asked that his own Budget should not be discussed. I can say to him now that on this side of the Committee my right hon.. and hon.. Friends and I relish the opportunity which he has afforded us of filling his vacuum. We will take the opportunity, in so far as we are in order, during the next few days, to expose to the country not only the nakedness of hon.. Gentlemen opposite, but also the alternative policies which they should have followed and which the next Labour Government intend to follow as soon as the Prime Minister calls the General Election.
I think it fair to describe the Budget as straightforward, simple and inconsequential. It wore the air of a man who recognises the problems that exist, but who sees no prospect of solving any of them this side of the General Election. There can be no doubt that the Budget, in its content, has deferred any solution of the major problems which face this country until the election is over and, judging by the way the Chancellor presented it, he seems to think that he will have little interest in solving them.
The Chancellor denied on television last night that he is taking risks. He said that he is taking a chance. I am not sure what is the difference, unless it is the difference between fixed odds betting and football pools. I agree that he is taking, whichever word he cares to choose, a chance or a risk, but the criticism I make is not that he is taking a chance in what is admittedly a risky situation, but that over the preceding 13 years the Government have not steered us further away from the financial rocks than we are today; that they have not during those years so strengthened the economy that we could face more easily and with greater equanimity nine months of boom without dire speculations going on about whether we are likely, in the autumn, to enter into a balance of payments crisis.
The proposals which the right hon.. Gentleman has made are almost irrelevant to the situation that could arise in the autumn. The tax on beer and cigarettes is basically irrelevant to the

balance of payments problem. As has been pointed out, although it can be borne relatively easily by a considerable section of the community, it will bring hardship to those citizens whose plight is often represented in Parliament, the old-age pensioners, who enjoy a pint of beer or a packet of cigarettes. I know of no way, except by increasing the pension in some way, to take account of these deliberate acts of Government policy.
This is by no means the first series. Rents is another by which the Government deliberately operate the levers of policy to discriminate against some of the hardest hit sections of the community. I hope that the right hon.. Gentleman will take some of the proposals which we have to make on this issue. The right hon.. Gentleman has also got into trouble with the bookmakers, although he is not the first Chancellor to do that. A famous ex-Chancellor, nearly 40 years ago, got into trouble not only with the bookmakers, but with the bishops. I do not know whether the present Chancellor will incur the wrath of the Church, but we had better wait to hear what representations will be made and what the Chief Secretary has to say about the Finance Bill to find out whether the Chancellor has, in the words of the bookies, backed a loser or dropped a clanger.
It is also interesting to note that the nationalised coal industry is giving a helping hand to private enterprise steel. This is a trait which has distinguished the nationalisation of our industries and which, I believe, will continue. But, basically, the chance, or risk, that the Chancellor is taking is this. He is saying, "If exports continue to increase, if imports moderate, if inflation continues in other countries, if world trade continues to rise "—and, with a sidelong glance at his fellow Ministers on the Government Front Bench—"if I am not pressed by the rest of the Government to indulge in any grandiose schemes of new expenditure, if excessive wage claims are avoided and if the capital outflow slows down, then I can look forward with confidence to moderating the rate of growth of the economy from 6 per cent. to 4 per cent." What an epitaph on 13 years! I wish that he was taking the chance to keep the rate of growth up


to 6 percent. instead of reducing it, as he intends and wishes to do. Maybe in the present circumstances he cannot avoid reducing it to 4 per cent.
Among the minor proposals that the right hon.. Gentleman has made, I would like to acknowledge with gratitude that relating to invalid cars. I recall those long and turgid Finance Bill debates that we had last year when the House got the bit between its teeth and insisted that, whatever might be the difficulties of the Treasury, the House of Commons as such intended to have a concession for invalid cars. I am grateful, as are all hon.. Members, that the right hon.. Gentleman should have taken note of the views of hon.. Members which were expressed so strongly on both sides of the House on this issue. I only wish that he could have taken more note of our views. I do not suppose that many cheers will be raised about duty-free tobacco and spirits for people travelling by B.E.A. to Paris or elsewhere for the week-end.
I will not delay the Committee by dealing with the other minor changes, but I am glad, in respect of a major point, that the right hon.. Gentleman is taking new steps to encourage savings. It is absolutely vital to the economy that we have a high level of savings. I wish that he had launched the National Development Bonds with a greater flourish of trumpets.
I was disappointed with the right hon.. Gentleman on the question of tax simplification. It was his predecessor, the present Leader of the House, who told us three years ago that, at that stage, he had set on foot a full inquiry into one system of taxation of companies instead of two, the amalgamation of Income Tax and Surtax and the form of Exchequer accounts. Every year we get a bow in the direction of tax reform from successive Chancellors, but that is all. This year we have had a White Paper. If it takes three years to produce a White Paper on tax simplification, goodness knows how long it will take to get the reforms.
I turn to dividends, rents and wages. The charge I make against the Government is not related to the last 12 months, but to the last 12 years. During that time successive Chancellors have shifted the burden of taxation from dividends and profits to persons That is the

charge I make and it is a charge which can be clearly demonstrated by the figures which can be produced. Let us consider two or three of them. Consider, first, the receipts of taxes. Tax receipts from companies, including Profits Tax, have gone up during the lifetime of the last four Administrations by 27 per cent., or little more than a quarter. Tax receipts on capital have gone up by 37 percent.
On the other hand, tax receipts from persons have more than doubled. I realise that this is a crude comparison because there are, naturally, more taxpayers, but if the revenue is as buoyant as we are led to believe it is, this also reflects itself in the profitability of companies. One would expect, therefore, to see a natural buoyancy in the receipts from taxes based on company profits, but that has not happened. It has not happened because the party opposite has deliberately and ostentatiously shifted the burden on to the individual.
Let us consider some other examples which may be drawn from the tax receipts or receipts of dues. Receipts from rates have increased by 179 per cent. and from National Insurance contributions by 190 per cent.
I should like to add my tribute to the Richardson Committee for the clear way in which it disposed of the added-value tax and set out the considerations. It is not surprising that its conclusion was that the percentage rate of tax falling on companies in this country compares favourably with the rates that apply in other countries. I am delighted that this should be so if our overall fiscal position permits it, but I do not accept the view that the Chancellor should achieve this position by shifting the burden, as he has done, on to the wage-earners in a way that has affected the poorest of them worst.
Over the span of Conservative rule total incomes from rents and ordinary dividends have increased to a much greater extent than total income from wages and salaries, and so has the total value of ordinary shares. It comes to this—0that at the end of nearly 13 years of Tory rule incomes from rents and dividends have gone up more than incomes from wages and salaries, proportionately speaking, but tax receipts from wages and salaries have gone up more than the tax receipts from profits


Yet the right hon.. Member for Wolver hampton, South-West (Mr. Powell) is still dissatisfied and would like us to do more in this direction.
If we take 1963 by itself, earnings from salaries have increased by 5·3 per cent. Hourly rates of earnings in manufacturing industries have increased by 4·5 per cent., but the increase in the total of ordinary dividends is up by 7·8 per cent. Therefore, taking that year alone, there is a marked discrepancy. The Government have promised more than once to take action against these dividends if they rose at a faster rate than wages and salaries. But when does the Chancellor propose to start? He had the opportunity yesterday and he missed it.
In our view, the right hon.. Gentleman should have taken action. He failed to do so and I am astonished that he should expect to succeed with an incomes policy in the face of this manifest unfairness. Yesterday's increases in the taxation on tobacco and alcohol shift the burden against the wage earner, against the man at the bottom end of the tax scale, and they increase the level of indirect taxation. They depart, once again, from the basic principle behind which we on this side of the Committee are firmly united, that taxation should be based on the ability to pay. This is where any attraction towards indirect taxation faces its greatest weakness.
I give the figures because it is important that they should be on the record. Anybody can challenge generalisations, but these are as accurate figures as I can give. For example, a married man with two children and an income of £12 a week pays in indirect taxes 15·9 per cent. of his income, but at £2,000 a year a similar family man pays only 7·6 per cent. of his income away in indirect taxes. This is the objection to it. The amount paid by the £2,000 a year family man is, of course, greater, but the proportion of taxation that comes out of the total income is less.
The Chancellor said yesterday that he thought that there was substance in the argument that the basis of indirect taxation would have to be widened. I can see the attractions of it to a revenue-hungry Chancellor. There are undoubtedly a number of fields in which

this taxation could be extended with some profit to himself, but on this side of the Committee we would be opposed to any increase in indirect taxation which would have the effect of adding to the burden of the wage-earners because it would not be related to the capacity to pay. Any scheme for broadening the basis of indirect taxation as suggested by the Chancellor would have to satisfy us that that would not be the result.
I turn to another problem on which I feel that the Government have been singularly lax, namely, waste in Government expenditure and disinterest in true economy. The Government have spent more on defence than any other Government in peace time. This year, defence makes up the largest single Vote. It reaches a total of £ 2,000 million. In these circumstances, one might be forgiven for thinking that when defence is eating into our resources so considerably there would be the most rigorous efforts to avoid waste and to ensure that we get full value for our money.
Outside the Government Front Bench there is an almost universal belief that this gross expenditure has utterly failed to provide us with adequate defences at a reasonable cost. Yet time after time we have been fed with complacent statements from Ministers about what is happening. The pattern is always the same. We have all heard it more than once. Defence Ministers, Service Ministers, and particularly the Minister of Aviation, come to the Dispatch Box promising great new developments in weapons. Research teams are established, work begins, money is spent and after a time rumours circulate that all is not plain sailing. When my hon.. Friends question Ministers there are indignant denials and reflections on our patriotism that we dare to challenge.
More money is spent. Work continues. Difficulties multiply. Then suddenly a Minister announces at the Dispatch Box that he intends to abandon the weapon on which he had placed so much reliance and to cancel the contract. But he has found a better weapon and he spends more money and the whole circle comes round again. We had a sample of this recently from the Minister of Aviation, when he was asked by my hon..


Friend the Member for Newton (Mr. Lee) about the cancellation of the T188. The right hon.. Gentleman said:
This is another typical example of the hon.. Gentleman's characteristic tendency to miss represent the facts. We have not cancelled T188. All we have done is to terminate the programme.
It is all very well for hon.. Members to laugh. There was laughter on that occasion, too. The right hon.. Gentleman went on:
…there is no question of cancellation. Our decision has been based on the fact that further expenditure would not pay off. The expenditure so far incurred has given a reasonable return."—[OFFICIAL REPORT, 25th March. 1963; Vol. 692, c. 459–60.]
Since 1951, 30 major defence projects have been cancelled by Tory administrations. Since the last General Election, in 1959. they have cancelled eight projects. They are: December, 1959, Blue Steel Mark II cancelled, cost £825,000; March., 1960, Bloodhound Mark III cancelled, cost £600,000. I am taking the figures that the Minister gives. I prefer to rely on his figures and let him be hanged out of his own mouth. April, 1960, Blue Streak ballistic missile cancelled, cost £84 million; October, 1960, Spectre rocket engine cancelled, cost £5·75 million; December, 1961, low level surface-to-air guided weapon cancelled, cost £800,000; February, 1962, Rotodyne helicopter cancelled, cost £11 million; August, 1962, medium range surface-to-surface missile cancelled, £32·1 million; December, 1962, air-to-surface ballistic missile cancelled, cost £27 million. Eight projects cancelled at a total cost of £162 million.

Mr. Stephen Hastings: rose—

Mr. Callaghan: I will gladly give way to the Minister of Aviation if he wishes to interrupt.
Sometimes, of course, these projects are very successful, and they go into service, as in the case of the Bloodhound missile. In this case, the Minister of Aviation told us that a 10 per cent. return on the capital employed, a very reasonable rate of return, would have yielded Ferranti a profit of £400,000. In fact, as we all know, the profit to Ferranti was £4·5 million—a 100 per cent. return. The House of Commons has a right to demand that a Govern-

ment who are so lax in their control of expenditure should submit themselves to the country.
To take another illustration, no Service or Treasury Minister has ever successfully explained to the House of Commons Idly all the three Services were allow ed to continue to develop, even though there was some merit in allowing them to begin, three separate missiles simultaneously for ground-to air and sea to-air attack purposes. They are the R.A.F. with the Bloodhound, the Army with Thunderbird and the Navy with Seaslug. What detailed investigations has the Chief Secretary to the Treasury or his predecessors made—and they were appointed for this purpose—into the question whether the necessary results could have been obtained by a single weapon and a single development instead of tying up technological resources and men with the skill and qualifications in three separate projects of this sort?
Lord Plowden, in his Report on the Control of Public Expenditure, was fully aware of this danger and he outlined it some year; ago. So the Government were not in ignorance. He spoke of the danger of wasteful Government expenditure which arises in the no-man's-land between the conception and launching of a polio) and the continuing administration, or, in this case, between the time the project is accepted and the work begins and continuing expenditure even when its purpose has been outdated or parallel developments have rendered it superfluous.
I understand that at long last, and many millions of pounds later, efforts are being made to co-ordinate, among the Services, the design of a weapon which will be suitable for both sea and air purposes. I am not surprised that experienced commentators speak of the general choas in the missile field. From the financial angle it is a history of default and failure by Ministers to control the defence Services. Is this what the Chancellor had in mind recently when he made his party political broadcast on the television and said:
We are determined to ensure that you get full value for money"?
There are other examples, too, in the civilian field. There is their failure to grapple with monopolies, to prevent


wasteful spending, and the failure to prevent rising prices. Of course, they are willing to fight the small shopkeeper and, thanks to the Secretary of State for Industry, Trade and Regional Development and President of the Board of Trade, I think that they will succeed in bludgeoning him into defeat. But as far as monopolies are concerned, they go their way unchallenged.
The Chancellor has remained silent about the conclusions of the Purchasing Officers' Association, a group of men drawn from 351 firms responsible for spending a sum in excess of £2,000 million per annum. They reached the conclusion, after detailed investigation among their members, that whilst there was a clear justification for an increase in prices by the engineering industry of between 2½ per cent. and 3 per cent. because of the recent wage award, nevertheless the average rise being demanded in engineering prices has been between 4 per cent. and 5 per cent. and a number of firms have attempted to obtain increases ranging from 7½ per cent. to 15 percent.
They ascribe this to the fact that "the climate is considered opportune" for price increases. They properly advised their members to resist strongly such unjustified claims. I congratulate them, as the whole Committee should, on the stand that they are taking. But when does the Chancellor propose to speak out on these matters?
Then, again, there is the Government's failure to examine, or to reach any conclusions on, proposals which are now going ahead in South Wales which will involve expenditure of over £30 million on two separate projects for importing iron ore. There are very strong grounds for believing that the whole of this importation could be centralised in one pair of hands, but I believe that no view has been expressed by the Government as to whether one project at half the cost or less would not serve the purpose equally well and save the nation £15 million to £20 million of scarce resources at a time when pressure on investment is building up.
There is the Chancellor's failure to deal with the situation created by the increase in investment allowances in relation to tax repayments. The Comp-

troller and Auditor General has already reported on the matter. He has drawn the attention of the Government to the fact that as a result of the large increases in investment allowances a number of large companies which he examined have been "repaid"—I put that word deliberately in quotation marks—£12 million in Income Tax that they have never paid in the first place and are never likely to have to pay. The old-age pensioners who omit to declare their old-age pension on their Income Tax returns are chased for every penny of it. These companies have got £ 12 million through a loophole that the Chancellor could have closed up yesterday. He had his opportunity.
Take another example, a minor one, the decision 14 days ago to abolish the so-called property dollar. Why did the Chancellor think it appropriate at this stage to allow it to become easier and cheaper for those who seek a place in the sun to buy a villa in the south of France? Is this really the time, when the current account is moving into deficit, when there is a serious deterioration likely in the coming months, to make it easier to escape from the consequences of Tory rule by buying villas in the Mediterranean? All these and many other illustrations that I could give to the Committee betoken feebleness of control and disinterest in true economy. This country is spending over £7,000 million a year and it is the Chancellor's duty, indefatigably and without ceasing, to ensure that this gigantic sum is well spent, and to wage a constant and unremitting campaign for efficiency and economy in Government spending. He cannot claim that he has done so.
Now I come to the failure to expand the economy. The Chancellor, naturally, was very pleased with himself—and we should join him—that for the third time in 13 years of Conservative rule the economy has been growing at a reasonable rate during the last 12 months. He pointed out that the rate of production, exports and investment has increased. We are all grateful. But does he not realise that this in itself represents the clearest possible condemnation of the policies of his predecessors? We used to talk about a trade cycle. Now we have a new phenomenon, a political trade cycle which my right hon.. Friend the


Leader of the Opposition has often described, and which comes round at every General Election.
The trouble on this occasion is, as my right hon.. Friend said yesterday, that this time it was mistimed. This Budget was timed to come after the election and not before, but, for reasons which it would be painful to go into, we have not yet had the General Election. So with this Budget I fear that hon.. Members opposite are faced with the hang-over without having had the advantage of the celebration.
But when the Chancellor was glancing, as he did on a number of occasions, at the 12-year record of the Government, he did not mention that our progress in production over that long period makes dismal reading by comparison with many other major industrial countries in the world. We have been at the bottom of the league year after year. The Chancellor boasted about the increase in production since last April. But let us look at a 10-year average from 1953. He warned us not to take short-term trends of imports. Very well, let us take a long-term trend on industrial production. Our increase in industrial production in the last 10 years has been 37 per cent. The world as a whole, including Peru, Algeria and any other group of countries that one cares to mention, has managed a rise to 58 percent.
Let us look at some of the countries nearer to ourselves: Western Germany, 107 per cent. increase in industrial production; France, 105 per cent.—[An HON.. MEMBER: "Capitalist Governments."] I agree that they have capitalist Governments. But is the complaint that this capitalist Government does not know how to make capital? Italy has an increase of 138 per cent.; Belgium, 52 per cent.; Holland, 71 per cent.; Canada, 51 per cent.; Sweden, 52 per cent.; Japan 275 per cent.; and the United States, the closest to us, 38 per cent. Of course, it is the richest country in the world. Are we the second richest country in the world?
My right hon.. Friend pointed out the other day that for the first time since the days of the Tudors the British workman, in terms of real wages, is getting a lower wage than the German worker. It is a fact that the average increase in the E.E.C. countries since 1951 has

been 104 per cent. It is time that we destroyed this myth that real wages in Britain are: going up faster than they are in other countries. They are not going up faster. The best figures available show that labour costs in Britain, taking into account National Insurance contributions, are much the same as in other countries of Western Europe, though far less than costs in the United States.
How do we put up real wages and expand the economy? We were waiting to hear about this from the Chancellor yesterday. I agree with the right hon.. Gentleman to this extent. We cannot permanently expand the rate of growth faster than the growth in exports. Exports come first. There is no doubt about that. The Chancellor told us that exports w ill look good again this month.
But let us look at the long-term trend. I take the right hon.. Gentleman up on his own point. The United Kingdom share in world trade of manufactures has declined since 1950 from 25 per cent. to 15 per cent. During the last five years, when, surely, no one will argue that the other nations had not fully recovered from the effects of the war, as one might do about 1950. Britain's share of world trade in manufactures has declined from 18 per cent. to 15 percent.
N.E.D.C. does not take a very optimistic view about the future. It has just completed an examination of the prospects of 17 major industries between now and 1966, and it reports:
The extort estimates of the 17 major industries appear to be insufficient to achieve a satisfactory balance of payments.
Does the Chancellor disagree with that view, or does he believe that exports are going ahead sufficiently fast to take care of any balance of payments situation?
Exports have risen by 8 per cent. in the last year. They have done better than I expected they would. I am very glad to acknowledge that this is so. [HON.. MEMBERS "Hear, hear."] But let hon.. Members wait for the sting in the tail. Imports are up by 7 per cent., having risen twice as fast, and of those imports raw materials are up by 7 per cent. and finished manufactures are up by 16 per cent. Within the most


recent period of three months the export volume is up by 3 per cent. over the previous quarter, but the import volume is up by 7 per cent. I think that the Chancellor dismissed this relationship rather lightly. He acknowledged that manufactures play a substantial part in the figures, but the estimates shown to me are that machinery imports are 33 per cent. higher than a year ago, clothing and footwear 36 per cent. higher, and miscellaneous manufactures 20 per cent. higher.
The Chancellor argued—I was glad that he departed from the doctrinal ground in the matter of controlling imports; he said he did not take his stand on doctrinal grounds—that cutting off manufactured imports, machinery, was undesirable because it might afford protection to our own industries and make them less competitive. I agree that this is a good argument against it. But the further argument that we should not be helping the underdeveloped countries is much less valid, except in the case of textiles. For example, I do not know how many computers we import from East Africa.
The most superficial argument is that we cannot expect to export machinery and consumer goods unless we are prepared to import them. Stated as a generalisation, that is true, but the most advanced countries which are importing and exporting the same types of manufactures are doing better at it than we are. This is the point. This is the weakness of the case. I see hon.. Members opposite shaking their heads. I am making a long speech, so I merely invite them to look at the figures. The position with all our major competitors —at least Germany and Americas—is that their exports of these advanced manufactures far out weight their imports of them. This is true of us, but to a much less extent. There are specific examples in office machinery, metal working machinery, scientific instruments and organic chemicals. In each of these important industries the record of the United States and Germany is better than ours in establishing a favourable ratio between exports and imports of the same manufactures.
What does the Chancellor say about this? I should have thought that this

was the nub of the problem. It is no use saying that we have to bring them in if we are to sell them. The point is that others are doing it but doing it very much better. Moreover, since 1958 in all the cases I have quoted except metalworking machinery our position relative to other countries has deteriorated. This is what one expects when one sees that our share of trade in world manufactures has decreased from 18 per cent. to 15 per cent.
There is an argument which the Chancellor might have used against import control which seems to me to have a great deal of validity. Maybe the Chancellor accepts it, but he did not use it. It is that in conditions where home demand is high, the net effect of restricting imports might be to divert to the home market goods which would otherwise have gone for export. That is something which must be weighed. But what I regret, and what I believe the Committee regrets, was the passivity of the right hon.. Gentleman's speech on all these matters.
The N.E.D.C. has given him a great many components about which we have heard none of his conclusions. It recommended, for example, that specific industries should be identified in this sort of grouping where rapid growth of manufactured imports has taken place. It said—I hope that the right hon.. Gentleman will not mind this little piece of Socialism which crept into the N.E.D.C. Report—that we should find out the possibilities of producing on a competitive basis in this country goods of a similar type. This is the Labour Party's approach. I wish that it were the Chancellor's; we might have done a little better by now if it had been.
There are a number of ways in which we could establish industries in this country to compete with imports. The Chancellor may have objections to it, but he has never argued the case. We have never had the privilege of hearing what his conclusions are on these matters. For example, we should take the view that we could set up publicly-owned factories—[Interruption.] This is what N.E.D.C. is proposing. I repeat; it said that specific industries should be identified where rapid growth of manufactured imports has taken place, and we can


then find out the possibilities of producing on a competitive basis in this country goods of a similar type. If hon.. Gentlemen opposite object to a publicly-owned factory or to the State entering into partnership with private enterprise, when do they propose to withdraw the State money in Wiggins Teape or in Colville's?
Under this policy, if these were the Government's conclusions, we could combine two aspects of our policies by establishing such publicly-owned factories in development districts in Scotland and the North-East. I claim that this would be a dynamic and positive approach to the problem. But if this were not sufficient—I make this clear—and if we were threatened with being engulfed by a flood of imports, no doctrinal grounds should stand between us and controlling imports as a means of ensuring that our growth continues and expansion goes on. The alternative if we allow ourselves to be flooded and take no action will be what we have seen before. It will be 1961 all over again. It will he stop-go, the pay pause and unemployment.
Our main emphasis is on exports. Exports come first. We need a growing and not a diminishing share of world trade. That means more competitive export prices and enlarged industrial capacity. The Richardson Report shows that exports are frequently the least remunerative part of an industrialist's enterprise. Again, the Chancellor was singularly passive about this on television. All he had to say was:
If I could think of any other way of encouraging exports I would do it.
The Chancellor has had the advantage for a year of the N.E.D.C. document on conditions for faster growth, and he will find, in paragraphs 137 to 160, a whole series of proposals made by the N.E.D.C. and a whole series of ideas put to him as ways and means of overcoming this problem. Why have we not been favoured with his conclusions on this set of ideas? Does he accept them? Does he reject them? Or does he, as seems most likely, intend to put the whole thing off until after the General Election and let the Labour Government deal with it?
I agree with the Chancellor's interjection that we have undertaken, through

G.A.T.T. not to give financial aid, directly or indirectly, to exports. I sometimes wonder whether our competitors are a; scrupulous as we are. Even here, it seems hard to draw a line as to when one is giving aid to exports and when one is not. I can think of a number of illustrations which I could give now.
Although we now have the opportunity of giving permanent aid, I think that the Chancellor should have examined seriously the N.E.D.C. suggestion of giving strictly temporary financial aid to our balance of payments and to prevent a further period of stop-go. This was put to him by the N.E.D.C. We do not know what his conclusions are. Others will have to reach their conclusions when we have had our discussions with other countries. Such aid could take the form of subsidies or the remission of taxation. This is the proposal of the N.E.D.C. It is not mine. This could be tackled. We could see how other nations react to it, because we are envisaging a situation in which the current account in our balance of payments is deteriorating and we are entitled to protect that situation.
I think tat the whole nation is united in its determination not to go back to a period of stop-go again. We should he ready to form consortia to aid small firms with their exporting problems. We should make an examination, industry by industry and firm by firm, to see what prevents firms from exporting and what assistance they need. We should make experts more profitable to them. This, we are told, is the stimulus, at least in the capitalist system, to which they will respond.
We should review the quality and experience of our economic staff in our overseas missions to see if we have the right people in the right place. The Government should enter the field of marketing research on their own account and make the results available to British industry. We ought to consider more standardisation of export products so that spares can be made easier to secure and servicing simplified. We ought to review the system of overseas agencies and, if necessary, set up special machinery for negotiating with the U.S.S.R. in conditions where a State trading monopoly is making contracts with individual


firms, and especially with countries which have long-term plans.
The Chancellor called for ideas. There are plenty of them. Most of these have been put forward by the N.E.D.C. and others in the past, but there have been no conclusions and no action. This is the difficulty and the trouble with which we are faced. The N.E.D.C. has canvassed these ideas and I believe that it depends how seriously the Government take the problem as to what they will do. I thought yesterday that the Chancellor seemed to exude some grim optimism, whereas, on the other hand, most of his critics believe that we are heading for trouble in the autumn.
There are two other things. We should have a review of overseas military expenditure which is now running at record levels, and we are bearing a very heavy burden across the exchange. There should he a review of overseas trading corporation tax arrangements to see whether there is still a net advantage.
Apart from putting exports first, what about a firm incomes policy? It is clear that the Chancellor has no idea why his predecessor's policy failed. I hope that he knows the reasons, but I will repeat them once again. It failed because it was manifestly unfair and one-sided. It was a panic reaction to a crisis in our capital payments account. The right hon.. Gentleman's predecessor introduced the pay freeze and economic stagnation at the same time. There was no consultation with either side of industry. He breached agreements that had been freely entered into. He set aside negotiating machinery.
The right hon.. Gentleman allowed prices and rents to rise. He made no attempt to control profits or dividends except through the speculative gains tax. How much has that tax raised? We have had a complete year of that tax. I suppose that the figure is hidden away in Clause 7 or 8 of Schedule D, but it would be very interesting if the Chancellor could give us an inkling of the estimate which the Treasury has got. The policy failed because it was manifestly unfair in its application as between the various sectors in the community.
I felt impatient when I watched the Chancellor on television last night—no

doubt he will feel the same about me tonight—and I heard him say that all we needed was a collective act of will in order to get an incomes policy and that he doubted whether the Budget could do much to help with an incomes policy. I completely disagree with him. Does the right hon.. Gentleman really believe that the Budget cannot do much to help with an incomes policy? Well, then, the sooner we have a General Election the better.
I have already shown how tax changes have created unfairness in our system and how these trends could and should be reversed. The Chancellor could use the Budget to ensure through the capital gains tax that land speculators do not go unscathed. He could examine the question whether relative taxes on earnings and on capital do not bear too lightly on capital and too heavily on earnings. He could have told us what his reaction was to the F.B.I. failure to agree on a policy for "disciplining" profits. It proposed, and rejected, the idea of a variable Profits Tax scheme under which profits and earnings would move together. We heard nothing of this. These are budgetary measures. This is what the right hon.. Gentleman could have used the Budget for had he believed it possible to get a fair incomes policy. I think that the need for an incomes policy is widely understood and accepted throughout the country.
The Government have failed to use their own vast influence in the social and financial fields to establish background conditions that would enable an incomes policy to be introduced. The right hon.. Gentleman has relied on exhortation, and where it has acted it has done so in a way which has made the situation worse instead of improving the prospects. The Chancellor admits that an incomes policy is by far the most important element in his calculations. He has failed, and after the General Election we shall begin the task once more, untarnished by the Government's guilt, unencumbered by the "I'm all right Jack" philosophy and operating against the background of a policy, both social and fiscal, which will be fair and just. I hope that my hon.. Friend the Member for Southwark (Mr. Gunter) will return to this topic later.
public service investment is now going ahead at 20 per cent. per annum or 17½ per cent. at fixed prices. The present Leader of the House disagrees with this increase. The biggest concern must be with the construction industry. If this fails to take the tremendous load that the Government are laying upon it, it will not only fail on its own account but it will act as a bottleneck for other projects. The recent N.E.D.C. Report was very clear about the inadequacies of the building and construction industry to take the strain. It said that drastic changes would have to be made and that new techniques would have to be pressed forward. I quote:
There is no certainty in present conditions that the industry will be able to meet the demands made upon it.
What are the Chancellor's views on this? What will he do in these circum-stances? He challenges us to say what we would do. I will tell him. We would co-ordinate public investment so as to avoid a return to the stop-go policy which resulted in our falling behind in schools, roads, etc. We would employ a starting date procedure on a regional basis so that, if necessary, it would be possible to enable projects to go ahead in Scotland and the North-East and to hold them back in London and the South-East.
The Chancellor cannot yet rely upon industrial building systems to see him through his difficulties. At present, these systems account for less than 20 per cent. of the output of the industry, although I hope and trust that they will grow fast. But for the next three or four years the right hon.. Gentleman may be faced with this bottleneck which will prevent him fulfilling the growth which he wants and demands. We come back in all these matters to the Government's failure to plan either nationally or regionally. Regional planning is as essential as national planning if we are to succeed. It entails both employment policy in regions and the physical planning for land, by the distribution of population, making assessments, and endeavouring to guide it into particular areas and ensuring that it remains in those areas. It means planning for overspill, transport, communications, etc.
There is no regional planning yet. There is merely a series of public works

programmes for some of the regions. Regional planning would involve some control over premises in a congested region left vacant because firms move out. When they become vacant, all that happens at present is that someone else moves in. Much of our dispersal policy is negative at the present time. There should be control over office development in particular areas. We need plans for the use of land and much tighter regional organisation by the central Government. That, in company with developments on regional lines along the lines suggested by the N.E.D.C., would do a very great deal to introduce some coherence into our planning system.
This Budget is irrelevant—[An HON.. MEMBER: "And the hon.. Gentleman's speech."] I will leave it to the country to judge whether or not my speech has been relevant. I ask the Chancellor: what differentiates this political trade cycle from the previous trade cycles of 1959 or 1955? What is there different about what is happening this time from what happened last time or the time before? Where is the evidence of any new thinking on this problem? Where is the evidence that the Government have used the intervening period since the last political trade cycle to get down to solving some of the fundamental weaknesses in our economy? There is no reality about the Governments planning. They say that they have been converted, but it is like the Chinese general who converted his troops by baptising them with a hosepipe; but the right hon.. Gentleman escaped while the rest went under the hosepipe. I fear that the conversion is no more deeply seated than was that of the Chinese general's troops.
If we are to carry on through this present cycle as we are going at present, then, as it seems to be developing, I say that sooner or later we shall come back to the point at which we started, the same end-result—stop-go, pay pause and unemployment. The Government have made no structural alterations to British industry—how can we trust them not to go back to the same old remedies they have adopted time after time when they have been in trouble?
Because the Government have pushed the problems of the present period to


one side until after the General Election, because they have failed to deal with the fundamental weaknesses in the economy, because their conception of social justice and fairness is entirely different from ours, it is high time that they went. This is the basic case for a change of Government at the earliest possible opportunity.

4.42 p.m.

The Secretary of State for Industry, Trade and Regional Development and President of the Board of Trade (Mr. Edward Heath): It is becoming customary, I think, to congratulate the hon.. Member for Cardiff, South-East (Mr. Callaghan)—the "Shadow Chancellor", as I think he likes to be known—on the charm of manner and the smoothness of delivery of the speech he customarily makes on this occasion. It is, indeed, a very pleasant task. It is no empty compliment. I think that we on this side would agree that the hon.. Gentleman brought to his speech something that was perhaps lacking in that of the right hon.. Gentleman he Leader of the Opposition yesterday.
The Leader of the Opposition then very clearly laid down the lines—indeed, he did rather more than that; he produced the arguments and provided the figures. It was quite clear that there was to be no discussion of the Budget, there was to be no commitment by the party opposite—no views at all—and the hon.. Gentleman was, of course, to deal with the four points of the import gap, industrial shortcomings, incomes policy and regional development. The hon.. Gentleman has very faithfully carried out his instructions. He has dealt with those four points, and has quietly padded his way along the path of the master. The hon.. Gentleman must, therefore, be getting used to being "Shadow Chancellor", which is a position he is most likely to fill for some time, I think, whoever may win the next General Election.
That being so, I will turn to the speech made by the right hon.. Gentleman the Leader of the Opposition, who finds it so difficult to take any comments on his own speeches. His first point yesterday was that he discerned that we were now getting warning signs of critical strains in the economy. I put it to

him quite frankly: if he believes that that is so, what does he think should be done about it? I ask, because in the whole of his speech yesterday there was but the one suggestion concerned with the nature of the development of our industry to deal with manufactured imports. That was the right hon.. Gentleman's sole suggestion. What, may I ask, does he think will be the time phasing of developments of that kind in regard to what he himself has said are the signs of critical strains in the economy?

Mr. Harold Wilson: The right hon.. Gentleman has been a Member of the House long enough now to know the convention on Budget day that the Leader of the Opposition speaks only briefly, as I did yesterday—20 minutes—after the Chancellor's speech. The right hon.. Gentleman knows perfectly well that it is the convention that the statement of what the Opposition would do is made on the second day. That has been done today.
We had far more ideas in 50 minutes from my hon.. Friend the Member for Cardiff, South-East (Mr. Callaghan) than we had yesterday in 90 minutes from the Chancellor of the Exchequer. But if the right hon.. Gentleman is concerned to know what I, as an individual, as opposed to my hon.. Friend, would do, we, too, would very much like to know what the Prime Minister, as an individual, would do. I can, at any rate, send the Secretary of State a very long speech that I made in Swansea dealing with the very point he has just made.

Mr. Heath: Yes, I read the very long speech that the Leader of the Opposition made in Swansea, and I wish to refer to it later. But this is precisely what his hon.. Friend has not dealt with. He has gone into the whole field of defence expenditure and over the whole ground of the endless and age-old ways in which exports could be improved, but he has not committed himself to a view about the present state of the economy. Does he believe that this is a state in which there are critical signs of strain, or does he not? Does the hon.. Gentleman himself think that there will be floods of imports, or does he not? On his judgment of those two things depends his view of my right hon.. Friend's Budget activities.
This is one reason why The hon.. Gentleman has very carefully refrained from giving any expression of judgment about this Budget—absolutely none at all. Does he drink that more purchasing his power ought to be taken out of the economy? Last year, he had no hesitation about making a judgment, and said that the chancellor should have gone much further in encouraging enterprise—much further—by giving greater con-cessions financially That was his commitment.
The hon.. gentleman said then:
I believe that there is a case this year for doing more if he is to lower employment if he is to get the economy growing."—[OFFICIAL REPORT. 4th April, 1963; Vol. 675, c.642.]
The hon.. Gentleman had no hesitation in making that statement and he was wrong—absolutely wrong. This year, he entirely refrains from committing him- self on whether or not my right hon. Friend's judgment is right, and that is a view that the Committee ought to have from the Opposition if they are a responsible Opposition.
Does the hon. Gentleman say, in fact that my right hon. Friend ought to have levied more taxation on the public, or not? He has very carefully refrained from making any judgment of that kind. He has not even been specific on whether he thought that different measures ought to have been taken. He has indicated fairly broadly that he thinks taxation is too heavy in its in- direct form and should be moved back in balance to direct taxation. He has made that statement before in this House. He has said:
…towards direct and progressive taxation is the right way in which we should try to focus our own fiscal system."—[OFFICCIAL REPORT, 3rd May, 1962; Vol. 658, c. 1333]
That, to some extent, has been his general thesis today.
I was, therefore, very interested to read an article in the spring, 1964, copy of the Twentieth Century Quarterly by his hon. Friend the Member for Sowerby (Mr. Houghton), who is billed as the Labour Party's Front Bench spokesman on taxation, which stated:
A tax system suited to the affluent mass-production economy of the second half of the twentieth century is almost bound to rely more and more upon indirect taxation.

Perhaps it is more suitable that hon. Members opposite should speak as individual persons, as has been suggested Perhaps they think to escape the con- fusion and trouble arising from the views being expressed by hon. Gentlemen sitting next to each other.
What the hon. Member really suggested was that my right hon. Friend should have done more to put the burden on to profits. He was objecting to indirect taxation, but was very careful indeed not to commit himself too closely to that idea. Why? Because the party opposite did not vote against those taxes yesterday. The hon. Gentleman thought that Profits Tax should take the burden, but how does that fit in with yesterday's exhortations to do everything; possible to encourage Industry and take the burden off it? We see in these two speeches and the writings of the hon. Member complete confusion and no policy whatever.
The one thing which intrigued me was whether the judgment of the hon. Member, whatever amounts he thinks should be taken out of the economy, would lead him to the conclusion that this was the position in which he would impose a wealth tax. That is an extremely interesting question to study. I wonder what his views are. Is this the right point at which a wealth tax should be imposed? It is obvious that the right hon. Gentleman has banned the wealth tax.

Mr. Callaghan: rose—

Mr. Heath: I shall give way in a moment. So far, this is the only proposal which can be tied to the hon. Member, but now it is banned by his leader. The one child, strangled at birth—or has it perhaps been quietly boarded out for the time being?

Mr. Callaghan: I quite realise that the right hon. Gentleman feels happier this week than he did last week when he was dealing with resale price maintenance, but obviously he did not listen to my speech. Perhaps he will do me the hon. our of reading it tomorrow. He will find answers to both the questions he has put so far.

Mr. Heath: Of course I shall read the speech. I also listened to it with tremendous interest.
The other question to which we ought to have an answer is: what is the Opposition's attitude on imports at this moment? Is it the view of hon. Member's opposite that the level of imports is dangerous and ought to be controlled now? There is no point in talking in hypothetical terms and saying that there may be a situation—[Interruption.] The hon. Member ought not to be hesitant He said when he opened his speech that he would accept the invitation of my right hon. Friend to put all his party's proposals on the table. I am asking for the very first. Are our imports at this point in such a situation that they ought to be controlled? If they are, the hon. Member ought to say so. If not, he should acknowledge that the Government's policy is right and that my right hon. Friend's policy is right.
I am going to deal with four points raised by the right hon. Member for Huyton yesterday, of which the first was the question of the import gap. Let us look at the figures. The Chancellor indicated yesterday that the preliminary figures for March are encouraging They have been published this afternoon. I should like to give them to the Committee. During March the figure for imports was £452 million, seasonally adjusted. This was much the same as in January when it was £457 million and in February when it was £449 million. The level remains roughly the same for these three months.
But exports continued to increase. The March figure, seasonally adjusted, was £373 million, compared with £326 million for January and £369 million for February. Thus the March figure sets an all-time record. In the first quarter as a whole exports were about 2 per cent. above the fourth quarter of 1963 In other words, the annual rate of increase was about 8 per cent. the same as last year I am sorry that the hon. Member for Cardiff, South-East looks so disappointed, but these are the facts. It seems clear that exports are rising strongly again after the pause in the second half of last year.

Mr. Douglas Jay: To get it clear, could the right hon. Gentleman give the figure for the gap between imports and exports in March on his new figures as usually calculated?

Mr. Heath: I think it is minus 17 for March. All the figures are published and the right hon. Member will be able to see the whole picture this afternoon.
Over the past year as a whole our exporters have done well. In the three months, December to February, our total sales were 11 per cent. up on their level in the corresponding months a year ago This growth has been secured in many different parts of the world. Exports to the sterling area were up by 9 per cent., to Western Europe by 12 per cent., and to North America by 18 per cent.
I shall deal with imports in detail and with the whole of the right hon. Gentleman's analysis. We ought to be able to achieve a widely based growth in exports over the next year. World trade in manufactures should grow as fast as in 1963, perhaps even faster. Prices for raw materials have been moving up and demand for them is strong. This affects our balance of payments, but at the same time it means that primary producing countries have more to spend on our products. Much of what they need can be supplied from Britain. In the United States the economy is buoyant and the programme of tax cuts will stimulate it This is our biggest market and we ought to be able to send more there.
The rich markets of Western Europe, which are now taking nearly 40 percent of our exports, still offer plenty of opportunities. In E.F.T.A. in particular there has been continued growth which now absorbs some 14 per cent. of our exports. In the three months, December 1963 to February 1964, E.F.T.A. exports rose by 13 per cent. compared with the previous three months.
Looking ahead, the surveys conducted by industry support this favourable out- look and export order books in the engineering industries stand at record levels. We can be reasonably optimistic provided that we always remain competitive. At the same time we must expect imports to go on rising over the next 12 months as production and investment increase and stocks continue to be built up.
Before going further on the question of imports, I wish to say something about what we are doing in exports. During the debate on Commonwealth trade we discussed in detail exports to Common wealth countries. I mention here the


Visit which was paid by the Canadian minister of commerce, Mr. Mitchell sharp and our pleasure that afterwards the candian Government dealt with discrimination against Scotch whisky, which was one of the matters we discussed with him, and also that they have promised to look at Canadian valuation and anti-dumping procedures.
In Spain we have just had an Industrial fair where nearly 300 British firms put on a most impressive display. I believe the results will repay their efforts Certainly the opportunities are considerable. In May we are to have a British Week in DÜsseldorf with about 600 British firms taking part. As Germany is our third best market in the world and our largest customer in Europe we believe there are considerable opportunities in that country.
In the debate on the Address I informed the House that I was willing to consider wider trading arrangements with the Soviet bloc. Over the last five years our trade with the bloc has increased by 60 per cent. It is still comparatively small, but we have offered, subject to safeguards, to liberalise as far as we can. We have reached agreement with Czechoslovakia, I am glad to say, on this programme and are now negotiating with other countries in the bloc In particular, we are very pleased to welcome here the Soviet Minister for Foreign Trade, Mr. Patolichev, and we are negotiating a fresh trade agreement with him.
In 1963 our exports increased by £55·4 million. This was 32 per cent. Above1962. Our imports were £91 million, 12 per cent. more than in 1962. This shows the gap which exists in our trade with the Soviet bloc. It is one of the matters to which we must give particular attention in the present negotiations.
As regards credits, mentioned briefly by the hon. Gentleman, the Export Credits' Guarantee Department insured £1,160 million of exports in the financial year just ended. This means that a quarter of all our exports are covered by export credit guarantees. This is almost double the proportion covered by our nearest overseas competitor, and I regard it as a remarkable action by the E.C.G.D., one of the Departments under the President of the Board of Trade, which remains flexible in its

approach towards these problems of credit arrangements.
There are two major factors in the export situation in the long term. First, there is the Kennedy Round, in which our interest is well known but in which the difficulties of turning 50 per cent reductions into negotiating rules, in particular with tariff disparities, are proving considerable. Second, there is the United Nations Trade Conference, at which I spoke in Geneva. I was able then to put forward ten points mainly dealing with trade but also, of course, taking in commodity agreements and supplementary finance, in an endeavour to reach agreement with other countries to improve and increase world trade, including that of the developing countries.
Therefore, in our export activities we are undertaking a great deal both immediately and in the long term to deal with this very important aspect of which the right hon. Gentleman spoke yesterday.
I come now to the question of imports. They were rising strongly throughout 1963. I have given the figures for the last three months, which were roughly at the same level. I believe that there is nothing wrong in this rise in imports. It is an essential condition if the growth of the economy We cannot expect exports always to expand stop by step with imports at a time of expansion such as this. The hon. Gentleman said that my right hon. Friend the Chancellor was taking a risk and rather implied that he was not justified.

Mr. Callaghan: No, he said it.

Mr. Heath: When the Trades Union Congress wrote to my right hon. Friend in February, it suggested just this. It said:
The measure of success that has so far attended the nation's attempts at economic planning rust now be reinforced, even if that means taking calculated risks on the level of internal demand and on the balance of payments.
So the Trades Union Congress, as the general secretary has made plain today, fully supports what my right hon. Friend has done.
Yesterday, the right hon. Gentleman quoted tie figures for manufactured imports.

Mr. H. Wilson: Before he leaves that point, will the right hon. Gentleman deal with this? He has given us the quarterly figures for exports. Will he now give us the quarterly figures for imports compared with the fourth quarter of 1963? I think that he said that there was an improvement of 2 percent. in exports. Will he tell us what is the change in imports and also, since he gave the export figures for the first quarter of this year compared with last year, may we have the corresponding figure for imports, so that the picture is complete?

Mr. Heath: I said that the quarterly exports figure was 2 per cent. up, and I said that for imports the figures are practically the same; there is no change This is a separate question. As far as this quarter is concerned—

Mr. Wilson: Compared with last year.

Mr. Heath: I said that the increase in exports for this quarter is 2 per cent.

Mr. Callaghan: Over the previous quarter?

Mr. Heath: Over the previous quarter, yes. I have not got the other figures with me. I shall give them to the right hon. Gentleman. They cannot be concealed, and I have no wish to do so, of course. What I am trying to do is to give the trend at this moment.

Mr. Callaghan: Seven per cent.

Mr. Heath: All right, 7 percent; I fully accept that. I am indicating the trends in the present quarter, and I have asked right hon. and hon. Gentlemen opposite to give their views about what deductions they make from the figures.
As regards manufactured goods, the right hon. Gentleman said yesterday that, over the past 10 years, exports had risen by 62 per cent. but our imports had risen by 141 per cent. But, of course, in his base year, 1953, these imports were less than one-third of the exports. There is a great divergence between the volume of exports and imports; and, as the right hon. Gentleman knows, it is obviously much easier to secure a large proportionate increase in a small figure than in a big one. This, of course, is the trick used in the statistics which the right hon. Gentleman

quoted. The absolute increase in exports was one-third higher than the absolute increase in imports, that is, £1,300 million as against £900 million.
I want now to spend a few moments in putting the import bill into proportion. [Interruption.] I am spending time on this because it was the one positive point which the right hon. Gentleman made yesterday in the whole of his speech. Eighty-five per cent. of our imports are fuels, industrial materials—raw materials and semi-manufactures—food, drink and tobacco. About 10 percent. is capital equipment and less than5 per cent. are manufactured consumer goods. These are the ones, very largely, with which the right hon. Gentleman is dealing.

Mr. H. Wilson: And semi-manufactures.

Mr. Heath: Semi-manufactures as well. But, surely, it is ridiculous today to suggest that, as a manufacturing country we ought not to import manufactured goods—

Mr. Wilson: I did not say that.

Mr. Heath: —or import them on the scale we do. The right hon. Gentleman's object is greatly to reduce them; other-wise, there is no point in putting the argument forward. But is not this a very old-fashioned idea? Is it not a hangover from the right hon. Gentleman's own time at the Board of Trade in the late 'forties when restriction was the rule, the time when, as he has always prided himself, he managed to encourage an artificial way of obtaining sulphur? Is it not a hangover from that!
World trade today is not now the old pattern of primary-producing countries sending food and raw materials to Industrial countries and industrial countries sending goods back to the primary-producing countries This is what the right hon. Gentleman is suggesting.

Mr. Wilson: No.

Mr. Heath: One-third of all world trade today is an exchange of manufactured goods among industrial countries.
The hon. Member for Cardiff, South-East said that we came badly out of the Comparison These are the figures In


exchanges of manufactured goods among industrialised countries, we sell half as much again as we buy. Therefore, we do not come badly out of it. We come well out of it. We sell half as much again as we buy from them.

Mr. Callaghan: The right hon. Gentleman has got it wrong.

Mr. Heath: I think that I have got the idea very well and the hon. Gentleman has been shown to be wrong in the arguments which he used.
Our imports of manufactured goods amount to about 5 per cent. of total sales in the British economy. The figure is the same for Germany.

Mr. H. Wilson:: semi-manufactures?

Mr. Heath: Our figure is less than the figure for France, where the proportion is 10 per cent., and it is less than for many other of the main European countries. If we are compared with these other countries, we are shown, in fact, to be in a better position.
Nor is there anything surprising in the fact that, as manufacturers of machinery, we also import machinery. In 1963, we imported £2 million worth of metal working machine tools from Italy. The right hon. Gentleman, apparently, strongly objects to that. We exported £3·9 million worth of the same type of tools to Italy. We imported £1·4 million worth from France but we exported £3·2 million worth to France. We imported £500,000 worth of typewriters from the United States and exported £1·2 million worth to the United States. This is the sort of thing which the right hon. Gentleman, for some strange reason—an old-fashioned, puritanical, Gladstonian view of trading—is trying to suggest we should not indulge in. There is absolutely no justification for that attitude at all.

Mr. Callaghan: rose—

Mr. Wilson: rose—

Mr. Callaghan: I am sorry that we are all trying to get up together, but it is really very difficult when the right hon. Gentleman fails to understand the argument. In order to complete the figures, will the right hon. Gentleman now give us, if he has them, the similar figures for 1958 or 1955 and draw a conclusion from them as to whether our ratio of im-

ports to exports in these categories, by comparison with other major countries, is getting worse or better? That is the argument, and that is what he should address his mind to, with respect.

Mr. Heath: With respect to the hon. Gentleman, that is the wrong question. The right question is, What arc the ways of increasing trade between the industrialised countries? The characteristic of trade during the past 13 years since the right lion. Gentleman and his hon. Friends went out of office has been a great expansion between the industrialised countries of the world; this is where the increasing prosperity of the West is coming from. I believe that, as a practical measure, we ought to maintain our freedom to import these goods as well because they are essential to the economy.

Mr. Wilson: I am sorry to interrupt again, but it is very hard to get the right hon. Gentleman even to first base on this point. Will he understand that the argument which I was putting yesterday and which I have put in many speeches recently—I am sorry that the right hon. Gentleman has not got it yet—is that it is not a question of putting import controls on this machinery; it is a condemnation of the Government in the exercise of their responsibility over the past 12 years that we have not created the dynamic in these firms and industries so that the balance has not developed in the way it should? Does not the right hon. Gentleman recognise that the figures I gave yesterday for machine tools show that we are, by and large, importing the sophisticated machine tools and exporting the more old-fashioned types? Is he really complacent at out the fact that over the last two, three, five or ten years we have been losing ground in the most modern types and that it is a question of encouraging the production of the most modern types and not a question of controls or Gladstonian free trade?

Mr. Heath: At the Barcelona Fair, I saw some of the most sophisticated machine tools being sold by British firms for export. The right hon. Gentleman does not seems to realise that it would be foolish for us to try to produce every sort of modern industrial machinery It is quite natural that


firms should want to import specialised machinery of different kinds. It is to the advantage of producers and exporters of consumer goods that we should do so. We should, therefore, concentrate on expanding trade and not on the right hon. Gentleman's project of replacing imports by home manufactures. It would be better to concentrate on the expansion of world trade as a whole.
The right hon. Gentleman also talked about our uncompetitive and backward industries. We have, of course, industry which needs to improve its standards, but we have much industry with great achievements to its credit. We do not produce the figures which I have quoted of sales to Western Europe and North America with backward, inefficient industries. We produce them with efficient industries. We supply one-sixth of the world's manufactured goods, and one-sixth of the world's exports of machinery are British. We account for one half of the world's exports of agricultural tractors, we are one of the largest exporters of electronic equipment and one-half of the world's ocean-going tonnage is equipped with British marine radar. These achievements should at least be mentioned when the right hon. Gentleman tries to give his impression of backward and inefficient British industry. It just happens to suit him at the moment to give that impression, but in the national interest the real facts should be stated.
The right hon. Gentleman then turned to other points. He particularly mentioned the problem of regional development and suggested that my right hon. Friend's Budget would have little effect on this. He entirely omitted to mention all that was done in the last Budget for what he is pleased now to call the two-nations economy, all that was done through free depreciation and the changes in allowances, and all that was done in the 1963 Local Employment Act for the standard grants. If the right hon. Gentleman wants more done in this respect, either he or his hon. Friend should suggest ways in which it should be done. They know perfectly well that what is being done in regional development is unequalled elsewhere in the world. This has been complemented by the two White Papers which we have published.

The hon. Member for Cardiff, South-East is on record as saying that what we are doing in our programmes
could not be exceeded by any party with any degree of responsibility.
It is, therefore, obvious that he cannot now project further things in this field, because he would be going against his own declared statements earlier on. What my right hon. Friend has done in regional development has contributed enormously to it. He gave the figures yesterday.
I want now to give the figures for the rising programme of capital investment. According to business forecasts, there will be an increase this year in private investment. Eighteen per cent. of our national product now goes into fixed investment, compared with less than 14 per cent. of a much smaller product under the Government of which the right hon. Gentleman was a member.
The other figure which I want to give for the regions is that of industrial development certificates, which confirm the upward trend in investment. In the year ended March, 1964, the area of industrial floor space approved in Great Britain was 42 million sq. ft. compared with 36 million sq. ft. in the previous year. That is the scale of new industrial expansion. This is true also of the development districts.
I can give further figures for I.D.C.s issued in the various regions. During the nine months ended March, 1964, Scotland had 4·1 million sq. ft., the Northern Region 4·5 million sq. ft. and London and the South-Eastern Region 3·3 million sq. ft. This is despite the fact that Scotland and the Northern Region have a much smaller proportion of the insured population—16 per cent. altogether, compared with over 25 per cent. in the London and South-Eastern Region. This gave an estimate of increased employment for over 25,000 people in Scotland and the North, and just over 5,000 in London and the South-East. This shows the scale on which private investment and development are going on in the development districts.
The other point which the hon. Member for Cardiff, South-East mentioned in accordance with his right hon. Friend's programme was the question of an incomes policy I want to deal briefly with the figures given yesterday by the


right hon. Gentleman, because he was careful to choose his own base. One can only deduce from this that he concludes that the moment the Labour Government went out of office was the exact point of time at which balance had been reached between incomes, profits, rents and all the other factors.

Mr. H. Wilson: indicated dissent.

Mr. Heath: I cannot see any other reason why the right hon. Gentleman should draw the deductions which he did.
If one looks at other dates, one gets quite different figures. This is important. To go back to 1938, one finds that whereas wages and salaries have increased by 465 per cent., ordinary dividends have increased by 220 per cent. This is a completely different picture.

Mr. Callaghan: Why go back to 1938?

Mr. Heath: The right hon. Gentleman chooses his special picture to bolster up his argument. His hon. Friend the Member for Cardiff, South-East took simply the figures for 1963 and 1964. He said "even one year ". One knows quite well that in these matters one cannot form a judgment on a movement of wages and salaries, dividends, profits, prices, and so on, taking just one year alone.

Mr. Jay: Does the right hon. Gentleman's use of the 1938 figures mean that he wants to go back to the distribution of national income of that date?

Mr. Heath: Not at all. I have not been arguing that. Let us take 1960. Since then, wages and salaries have increased by 19 per cent., company profits by 3 per cent. and dividends by 20 per cent. There is a difference of 1 per cent. between them, that is all. My point is that the right hon. Gentleman must not base his arguments about an incomes policy upon one specific year and take that as the only true and proper balance.

Mr. R. E. Winter bottom: In his estimate of dividends and company profits, has the Minister taken account of the issue of bonus scrip during the past few years?

Mr. Heath: The figures are all on the same basis, so they are comparable That is the main thing.
Yesterday, the right hon. Gentleman was scathing about an incomes policy. His hon. Friend has been much fairer about it and the difficulties which are involved in it. We all recognise these difficulties, but I have never heard the right hon. Gentleman in public urging his friends n the Trades Union Congress to work more actively for an incomes policy. I lave never heard him stand up in the House of Commons and state it as his view that in the N.E.D.C. there should have been much closer work to achieve an incomes policy. When my right hon. Friend was struggling for this in the earlier months of the year, it was not from tie right hon. Gentleman that we got support. He should bear this in mind when discussing the question of an income: policy.

Mr. H. Wilson: I will give the right hon. Gentleman this other reference: 26th July, 1961, in the House of Commons. That was the day that we debated the crisis statement by the present Leader of the House. I made the clearest statement that up to that time had been Wade from either side of the House on the need for an incomes policy and on the policies that should be followed in the Budget to make it possible. Those policies have never been followed in any Tory Budget.
Last year, at the Transport and General Workers' Union Conference at Scarborough on 8th July, I made a clear appeal for an incomes policy. This was followed by my hon. Friends and my right hon. Friends at our Scarborough conference last October. At all times, we have come out plainly on the need for an incomes policy, but not on the basis of f le kind of Budget policy that we have been having from right hon. Gentlemen opposite. We stated the conditions that were necessary for an incomes policy. The Government have rejected those conditions.

Mr. Heath: Of course, the right hon. Gentleman has always proclaimed the need for an incomes policy. The hon. Member or Cardiff, South-East did so again this; afternoon. What I want to hear front him is a positive urging of those involved to work for an incomes policy. My right hon. Friend's Budget last year was acknowledged by everybody to be an extraordinarily fair


Budget in the interests of the whole nation. That was the verdict on it. It certainly deserved an incomes policy.
I want, finally, to deal with the point raised by the hon. Gentleman on industrial policy. He said that what is at the root of all these problems is the industrial situation. At the end of his speech he went on to say: "We shall deal with this not by monetary methods, not in the main by budgetary methods, but by industrial policy." What exactly does he mean by that? Indeed, in the Swansea speech, the right hon. Gentleman once again said, "We shall deal with industry not based on finance but purposeful industry." Words, words. What does "purposeful industry" mean? We have never had a clear indication as to what he means by "purposeful industry ". How will he deal with this matter? He is not to deal with it by budgetary methods or by financial methods. How will he deal with it, and what more does he suggest?
We have now had a disclaimer that direction is to be used. Will the hon. Gentleman do anything more than is already being done to try to influence industry in its development? The hon. Gentleman says that he will encourage firms. How will he encourage firms in their work? He is going to make them efficient. How? Not by budgetary methods, otherwise he would have to use taxation. How will he judge whether they are efficient—by their profits, or what means? If he judges them on their profits and losses, he will, presumably, tax those which make smaller profits more than those which make larger profits.
This is the situation that the hon. Gentleman gets himself into as soon as he says that he believes in a purposeful industrial policy without defining what it means. We have had suggestions for export incentives, but we must remain within our international obligations There was not a single new suggestion—[Interruption.] Is he suggesting that we should not remain within our international obligations?

Mr. Callaghan: I made it clear in my speech.

Mr. Heath: I am putting a simple question. I listened very carefully to

what the hon. Gentleman said. It is my view that we must stay within our international trading obligations in using export incentives. I am surprised that the hon. Gentleman should even question that. He put forward many ideas, but I could not hear a single new idea about export incentives.
There is the aspect of resale price maintenance, about which the Leader of the Opposition is muttering to himself. We are setting out to encourage competition. What have we had from the right hon. Gentleman throughout the controversy ever since I made the statement in the House on 15th January? The right hon. Gentleman has been completely committed to a policy of the abolition of resale price maintenance since he was President of the Board of Trade. Would he deny that? His successor, who was in office for only a very short time after his resignation, published a White Paper which condemned resale price maintenance. It must have been prepared when the right hon. Gentleman was there. He said the same to the "Director" in 1959—that resale price maintenance should go.
Yet, during the whole of this controversy, what have we had from the right hon. Gentleman? We have not heard a single expression of view. He has not attended the debates and has taken no interest in this matter at all—absolutely none. In fact, he has been one of the most—

Mr. Callaghan: What about the Prime Minister?

Mr. Heath: My right hon. Friend has expressed his views clearly on every occasion that he has spoken since the statement was made. From the right hon. Gentleman we have had absolutely nothing. His has been one of the most shoddy and reprehensible performances by any Leader of the Opposition—[HON. MEMBERS: "Hear, hear."] It has been quite contemptible.
From the point of view of industry, we have had nothing of any consequence from the right hon. Gentleman—absolutely nothing. His only proposal is that we should somehow, in a way unspecified, try to encourage industry to replace imports. That is what the whole of his policy consists of.
I would sum up the matter by saying that we have a position at the moment in which the trend of exports is steadily increasing; that imports are high to support expansion, and that we have the reserves and resources to support them; and that we should take any risk involved, as my right hon. Friend the Chancellor is doing, because I believe that at this moment and during this year we have an opportunity economically to break through which is absolutely invaluable. We can break through to a steady expansion at a higher level than we have been able to achieve since the war. We can break through to a new high level of output. I believe that the measures of my right hon. Friend the Chancellor are intended to enable this to be done, and I therefore believe that the Committee should fully support them.

5.26 p.m.

Mr. J. Grimond: I think that the Secretary of State for Industry and Trade and everything else was justified in pointing out that the position of the official Labour Front Bench has been ambivalent, to say the least, on the question of the abolition of resale price maintenance.

Mr. Callaghan: No.

Mr. Grimond: It would, perhaps, have made the right hon. Gentleman's case rather stronger had his own captain been present on the burning deck when half the Tory Part put out in the boats.
There are two other points in the Secretary of State's speech which I want to take up before coming to my main theme. First, I hope that he will take the opportunity to withdraw the unmerited slur which he cast on Mr. Gladstone, to whom he attributed views on trade which the poor man would never have dreamt of holding. He must be spinning in his grave in view of them. Secondly, may I ask the right hon. Gentleman about his figures for industrial development? I understood him to say that 42 million sq. ft. of new factory space had been agreed to in the past year and that industrial development certificates in respect of 4·1 million sq. ft. had been granted in Scotland. If that is right it is not a very high proportion. It is one-tenth, which is about the normal proportion, and does not show any emphasis on Scotland's needs.
The right hon. Gentleman said that I.D.C's in respect of 3·3 million sq. ft. had been granted in London. He explained what appears to be a high figure by saying that the industrial population of tin: London area was higher.

Mr. Heath: That was the figure for London and the whole of the South-East.

Mr. Grimond: Even so, it seems to be relatively high.
What interested me particularly—I am not sure that I heard the Secretary of State aright—was that industrial Development Certificates for Scotland would account for 25,000 new jobs, while those for the London area would account for only 5,000. This is a proportion of one-fifth, although the proportion of space is three-quarters. Does this mean that this is an entirely different form of industrial development? One thing of which I am afraid is that, although we are grateful for it, in Scotland we al e getting a very considerable number of jobs of a sort, but not our full proportion of office jobs, technically skilled jot s and higher paid jobs. At some time during the debate, I should like to have some further information about what this curious discrepancy in the figures means.
The Secretary of State started his speech by complaining that there had not been much discussion of the Budget. But there is not much Budget to discuss. The Chancellor of the Exchequer's last will and testament has been to leave most of tae problems to his successor. Like other people, it struck me that the content of the Budget was designed for a Juno election and that the Budget speech ha d been put in because of an October election and that this was the difference between the somewhat lengthy speech and the few proposals.
I sometimes wonder in Budget debates whether we could not have the sermon of the Budget circulated beforehand. This would save a very great deal of time. We have heard most of the admonitions again and again, though some of them were admirable. There was the curious part in the Budget when the Chancellor talked of the things which he would not do. It reminded me of an old saying which can be applied to this Government—that they have a difficulty for every solution. The right hon.


Gentleman pointed out with great clarity how it was impossible to do many desirable things and that therefore the position must be left as it is.
One of the things which could have been attempted by the Government in their last months of office was a review of the tax system, but obviously it was felt in the Treasury that it was easier to put more weight on the two old whipping boys of tobacco and drink than to make an attempt to reform the system.
The Chancellor spoke of betting, and he has made certain changes there, but is it not possible to put a tax on one-armed bandits?
Then the Chancellor spoke of tax reform and simplification and it seemed at one moment that he was contemplating some change in company taxation. Indeed, he went so far as to say:
Discussions on this matter have now been completed and most of those who have discussed the matter with the Inland Revenue are, in principle, in favour of the scheme that has been devised. But they urged that there should be more time for consideration of the details and implications of the legislation that would be required than is normally available between publication of a Finance Bill and the Committee stage debates.
Surely the Government have had sufficient time to consider this kind of matter. But so it goes on. There is to be no change in the general structure of direct taxation.
I understand that the Chancellor said on television last night that if anyone produced ideas for tax improvements he would be delighted to hear them. We in the Liberal Party have already produced some. We brought out a pamphlet drawn up by a Committee presided over by Professor Wheat croft, which made suggestions that Income Tax should be broken down into personal occupation tax, business tax and company tax. These ideas have been undoubtedly welcomed. I do not want to embarrass him, but among those who have approved them is that lion of the Inland Revenue, the hon. Member for Sowerby (Mr. Houghton).
These ideas are well worth considering, and if they had been accepted they would have got the Chancellor out of some of the difficulties to which he pointed yesterday. I also understand

that he went on to tell the viewers that everyone thought the British tax system pretty good. That is not my impression. I also understand that one of the reports to which he referred in support of this view was the Richardson Report. It seems to have been overlooked that Richardson himself, although he rejected the value-added tax, suggested that the base of the Purchase Tax should be widened and reformed. I am surprised that the Government did not take the opportunity to carry out the recommendations in that chapter of the Richardson Report.
Then the right hon. Gentleman came to the form of Exchequer accounts. He said:
The Committee will recall that last May we published a White Paper on the Reform of the Exchequer Accounts…it may be useful to carry forward a year the figures which we published in last year's White Paper, and I am considering the publication of a further White Paper which would do this and indicate the lines of our further thinking."—[OFFICIAL REPORT, 14th April, 1964; Vol. 693, c. 248–50.]
The Government have been in office for 12 years. That is not a very decisive statement on this matter. Again, they have had plenty of time for cogitation about it.
A striking feature of the Budget proposals is that the deficit is up to £800 million and that £100 million is the amount that the Chancellor proposes to take in extra tax. I do not think that anyone could claim that the right hon. Gentleman was being unduly pessimistic or that this was an unduly harsh Budget, although I know that the right hon. Gentleman hinted that later in the year he might have to use the regulators. It would have been much better had he been able to start with a different tax system, but granted that he did not and that he felt only able to deal with the situation on its present basis, I do not think that I complain about this, although it implies an optimistic view of our export performance and of the economy generally. A most striking feature is that the Government are budgeting for 9 per cent. extra on defence at a time when other major countries—certainly the United States and the Soviet Union—are decreasing their defence bills.
The Chancellor told us, of course, that once more the theme of the Budget was


expansion without inflation, and that it was particularly important to avoid inflation because of the balance of payments situation. Again, I would have wished him to say something about the sterling area. Sooner or later this country will have to face the difficulty of maintaining sterling as an international currency on the narrow base of our own economy.
I was glad to hear what the Secretary of State for Industry and Trade had to say about exports, but I was not very clear on hearing his figures what the overall picture is. Do I understand that there is still a deficit and that we are nowhere near the surplus that the Government have time and again said is necessary?
While our export performance may be a matter for congratulations to industry, it cannot be a matter in which the Government can take complete satisfaction. The way in which we must compete in the world is through improved industrial efficiency and what did the Budget do about that? I cannot see that it did very much. An improvement and simplification of the tax system would reduce the enormous need for accountants and the time taken up in calculating the tax effects of doing things. Another obvious way is to take the tax off fuel oil. This would be a simple thing to do and now it would have been of some assistance in keeping down industrial costs.
The whole of the Budget is very much dependent upon keeping up the rate of saving, because this surely is the right hon. Gentleman's answer to those who think that he has budgeted for too big a deficit and that he has not taken enough out of the economy by taxation. The right hon. Gentleman must maintain the rate of saving. Here again, it looked at one time as if he would bring in a scheme for what we Liberals call "Save as you earn ", but this is to be for another day. It is a valid criticism of the Government that they have no scheme to cover contractual saving. I do not believe that the new Savings Bond will be adequate.
Then there is the question of regional development. The Chancellor and the Secretary of State claim that last year's Budget gave so much assistance to regions with high unemployment that

they need do no more. But I see that the rate of unemployment is still very much higher in Scotland, Wales, and the north-east of England and the West Country then in south-east England. While I do not belittle what has been done there In as the opportunity this year to vary the rate of employers' contributions as between different regions.
It is wise to consider the case for regional planning because it has been called into question. The case is, first of all, that the economic climate is never neutral. It is impossible to say that if a country left to what is called the free play of economic forces these will operate to The best possible advantage to everybody in a vacuum. The reason that there's so much employment in London is because London is the centre of power and influence. It is the headquarters of the Government, the City and industry. One only has to talk to people elsewhere to find that they want to come to this area because they feel that they will be in touch thereby with the heart of affairs. This, in itself, means that there is an artificial incentive to come to this area. We should reverse that to some extent and move power and influence to areas far from London and make them magnets not only for economic growth but for social and political growth as well.
The results of the concentration in London and the South-East cannot be measured simply by some form of economic cost alone. We must look at the social costs and of the frictions and delays that traffic problems for instance create. Now a considerable amount of work is being done on this subject, and quite rightly. If we reject regional planning, surely we must also reject what Crowther and Buchanan have said, and that will mean quite intolerable conglomeration in certain parts of the country and depopulation in the rest.
Lastly, nobility is not infinite. Those who say that, left to economic forces labour will flow to the places where jobs are available, forget that this is to live in a totally artificial world, and a fairly unpleasant type of artificial world at that.
Some of the same considerations apply to those who are critical of the attempt to have an incomes policy, and I want to say a word or two about


that. I do not believe that an incomes policy can put right everything in the economy. It may be just as important, if not more important, to get extra efficiency in industry than to hold down income. But certainly it would be totally unrealistic to suppose that the regulation of incomes can be left to some theoretically perfect economic machinery. I sometimes think that those who believe this are not addressing their minds to the real problem before us, because it is a problem of running a mixed economy and not an economy which is entirely socialised or entirely free enterprise. I would recommend them to read the introduction to Keynes' General Theory, where he pointed out that
The characteristics of the special case assumed by the classical theory happen not to be those of the economic society in which we actually live.
I believe that since Keynes we have learned a great deal about looking at the economy as a whole. His major book. General Theory, is opposed to the atomised view of the interplay of resources and so forth in a theoretically free market. Therefore, we have to try to move towards an economic policy without believing that this can entirely take the place of the bidding and counter-bidding in the market, and without believing that it will be the solution of all our difficulties.
There are a few points that I want to make about this. First, this is largely a political problem. It is not entirely an economic problem by any means, and it requires certain value judgments which cannot be made by any economic criteria. We have to make up our minds how much we think that doctors and other public servants and people who are outside the wage structure are worth. It is very largely the trouble over these categories of public servants that makes it very difficult to have an incomes policy. We have seen only recently how we have had a lot of unnecessary friction owing to our failure to have any policy for public servants, thereby creating trouble with the Post Office staff which eventually has to be met by some ad hoc machinery.
Another point which is made again and again is that if we are to have an

incomes policy, then clearly it has to take account of other incomes besides wages. Here I emphasise a point to which I do not think enough attention is paid. There is a case for saying that profits are not a cost, but there is no case for saying that business salaries directly are not a cost. I gather the impression, looking through company reports, that the total emoluments of directors go up whatever is happening to their companies. Our late colleague Lord Kilmuir did not feel it at all odd to leave a Government which had been appealing for wage restraint and go straight into industry and take a job as a director at an extremely high salary. There is no case for this. We must regard the incomes policy as covering the whole range of incomes.
Again, I believe that this may be a peculiarly acute matter now because we have not any philosophy for the public service and because we have not given enough attention to how we think that part of the economy should be rewarded. I should like to quote again Essays in Persuasion by Keynes where he said:
The problem of want and poverty and the economic struggle between the classes and nations is nothing but a frightful muddle, a transitory and an unnecessary muddle. For the Western world already has the resources and the techniques, if we could create the organisation to use them, capable of reducing the economic problem, which now absorbs our moral and material energies, to a position of secondary importance.
The author of the Essays goes on to say that he believes the day is not far off when the economic problem will take a back seat, where it belongs, and that the arena of the heart and the head will be occupied or reoccupied by our real problems, the problems of life and human relations, of creative endeavour, behaviour and religion.
So while I cannot complain very much about the proposals in the Budget, as is so often the case, it was the dogs which did not bark yesterday that would have been the most interesting to hear. It is what is not going to be done by the Government in the next few months that I find the most depressing. If they stay in office, the only justification for their doing so is that they have a job to do. I do not believe that job can simply be to wait and see what happens


in the autumn and pray that things get better.
I believe that there must be many people who, when they read the Budget speech—people who hoped for signs of new vitality in the Government—heard a message of a flatness comparable to the celebrated lines of the Poet Laureate on the illness of the Prince of Wales:
Across the wire the electric message came He is no better. He is much the same.

5.46 p.m.

Mr. J. Enoch Powell: The right hon. Gentleman the Leader of the Liberal Party did at least in part of his speech address himself to that subject which the spokesmen for the Opposition have conspicuously neglected—the economic significance of the Budget as a whole and the major act of judgment on the part of my right hon. Friend which it conveyed.
I should like to follow him in that part of his speech because the economic experience of the financial year just ended seems to me one of great importance and profound instruction for one of the great problems of our time, namely, the relationship between the movement of the economy and the budgetary and monetary management of government.
The central decision of my right hon. Friend last year, as this—as he made clear in his speeches—centred round the size of the net borrowing requirement with which he was to enter upon the financial year. He formed the judgment a year ago that the economy would probably not expand at an adequate rate, certainly not as fast as 4 per cent. per annum, unless he took steps through his Budget to increase the net borrowing requirement by a substantial amount—it was some £260 million.
Looking back at my right hon. Friend's speech, one must admire the wisdom, the caution and the foresight with which he expressed that forecast, caution and foresight which were not shared by many of his critics. My right hon. Friend the Secretary of State for Industry and Trade pointed out how far astray the Opposition spokesmen went on that occasion. "Half speed ahead" sneered the Economist in its leader on my right hon. Friend's Budget and ventured the opinion:

It looks a; if too little has been done to encourage the growth of demand in the short term.
We are now able to look back over what actually occurred in those 12 months. The addition to the net borrowing requirement which my right hon. Friend had thought desirable did not in fact occur: the cumulative requirement as it eventuate at the end of the year was little more than he had anticipated before the addition which he made in his last Budget. What is much more important, during far the greater part of the financial year the net borrowing requirement was not running appreciably above its level in the year before, 1962–63. In fact, in the first quarter of the financial year it was actually below it and in the first three quarters it never rose much more than £100 million above the corresponding figure in 1962–63. It was only in the concluding weeks that the excess rose to the figure of £412 million with which the financial year concluded.
Yet, although experience in this respect was so different from what had been anticipated, the economy did expand ant; at a faster rate than my right hon. Friend had then dared to hope for, at about 5 per cent. overall and in some sectors—in industrial production, for instance—at a rate of 8 per cent. In other words, the causes or intended causes were almost wholly absent and yet the effects took place, took place in full measure.
This was an experience similar to that of the analogous period in 1958–59, when it was also observed that the resumed forward surge of the economy began long before the budgetary measures which were intended to produce it could have produced a practical effect. Indeed, I think that someone writing at teat time said that the patient was up and playing golf before he had swallowed the medicine.
In his great book, The Golden Bough, Sir James Frazer speaks of an Australian aboriginal tribe which believes that the rising and setting of the sun are controlled magically by their own medicine man. They imagine that sunset can be delayed by fixing a clod of earth in the fork of a tree and that it is necessary, if the sun is to rise, that a fire or light should be kindled during the hours of darkness on behalf of the


tribe. The author goes on to imagine a sceptic suggesting that there might not be a relationship of cause and effect between the ceremonies and the phenomena which follow them. He imagines the retort of the medicine man on being faced with this scepticism:
'Can anything be plainer,' he might say, 'than that I light my two penny candle on earth and that the sun then kindles his great fire in heaven?'… The fallacy of this reasoning is obvious to us, because it happens to deal with facts about which we have long made up our minds. But let an argument of precisely the same calibre be applied to matters which are still under debate, and it may be questioned whether a British audience would not applaud it as sound, and esteem the speaker who used it a safe man—not brilliant or showy, perhaps, but thoroughly sensible and hard-headed.
The first sentence of this year's Economic Report runs as follows:
The economy expanded very rapidly in 1963 under the influence of fiscal and monetary stimuli.
The first part of that sentence as far as the word "1963" is a plain and, I think, indisputable statement of fact. The second, which I observe my right hon. Friend in his Budget speech did not use, is a statement of a purely superstitious character.
What, then, did happen during the financial year 1963–64? I will not use the expression of the steward on the cross-Channel steamer in the Punch cartoon who said to the sea-sick lady, "You do not have to do anything, ma'am; it does itself", and say that "it did itself". I will say that it was a spontaneous movement and reaction not of the economy only—for that is a cold, callous, abstract term—but of the nation as a whole to its opportunities and circumstances. Forces deeper, wider and more embracing than anything in the Budget, forces partly external, but also partly internal to this country, swept forward, obliterating the landmarks of the intended net borrowing requirement. Financially speaking, this was expressed by an increase in the velocity of circulation, to which the Radcliffe Committee found "no reason to believe" there is "any limit".
In short, this was a reaction to circumstances, to opportunity, by the nation as a whole. From now on, now that the greater part of our key resources are employed, the rate of further

advance is limited by two things: first, by the further remaining unused or under-used resources which could be put to use; but secondly,—and this is the great condition and pace-setter of further advance—by the rate at which the resources employed at present can constantly be moved towards more valuable, more effective applications, applications in which they will be more supported by more effective capital. The economy cannot expand faster than those things take place. There is no need to take steps to reduce the rate of expansion from 6 to 5 or 4 per cent.
Whatever be the rate of expansion—and let it be as high as possible—that is practical in the light of these real movements and changes in the future, that rate of expansion, this year and in years to come, can be expressed either in the monetary terms of a stable currency, or in the monetary terms of a currency which is constantly losing its value. In other words, it can be accompanied by a level of monetary demand which keeps pace with the economic advance, or by a level of monetary demand which constantly threatens to overshoot it. It is here that the central decision of my right hon. Friend's Budget is of its true significance to the economy.
If the "twopenny candle on earth" does not cause the sun to rise in the heavens, still, if we are not careful with it, it can set fire to the little hut and burn it down. The size of the net borrowing requirement and the size of the share of the total national output which the Government claim as their own have a potent effect upon the monetary expression of the nation's real economic experience; for Government expenditure, and the net borrowing requirement which follows from it, have peculiarities which give it a force that no other kind of expenditure or borrowing has. Not only is it backed by great political forces, by political commitments, not only is very much of it long-term in its conception and difficult to modify at short notice, but, unlike other expenditure, it is capable of generating its own finance and it is much less sensitive than any other expenditure to changes in prices.
Hence, above all, the supreme and unenviable responsibility of my right hon. Friend the Chancellor of the Exchequer


in taking his decision that in the circumstances of this year the net borrowing requirement could be increased by more than £300 million to nearly £800 million, or, if one eliminates the borrowing on behalf of local authorities—though I am not quite sure that it is entirely logical to do so—by about £150 million to over £600 million. I will say only this of that decision, that it certainly represents the utmost limit to which prudence could possibly go.
These questions of budgetary and financial policy are commonly regarded, certainly out of doors, as dry, recondite, and uninteresting. They are indeed matters of fascinating academic speculation and study, but I believe that they are much more. I believe that they have a profound human and national importance. It is not only false, it is dangerous, to inculcate into any nation, as so many do today, and as the very phraseology which we have become accustomed to use implies, that prosperity can be produced—

Orders of the Day — ROYAL ASSENT

Whereupon The GENTLEMAN USHER OF THE BLACK ROD being come with a Message, THE CHAIRMAN left the chair.

MR. SPEAKER resumed the chair.

Message to attend the Lords Commissioners;

The House went:—and, having returned;

Mr. SPEAKER reported the Royal Assent to:

1. Agriculture and Horticulture Act, 1964
2. Continental shelf Act, 1964
3. Legal Aid Act, 1964

And to the following Measures, passed under the provision of the church of England Assembly (Powers) Act, 1919:

Holy Table Measure, 1964
Faculty Juridiction Measure, 1964

Orders of the Day — WAYS AND MEANS

Again considered in committee

[Mr. GRANT-FERRIES in the chair]

Orders of the Day — AMMENDMENT OF THE LAW

Question again proposed

Mr. Powell: When the House went to another place just now I had not intended to detain hon. Members for many minutes longer; indeed, I was approaching the last point that I wished to make. As I said, I do not regard these economic questions as matters of academic or impersonal interest. I consider that they are of intensively human significance for the wellbeing of the whole nation It is not only false, it is also dangerous, to inculcate into a nation, as many do today—and as the very vocabulary which we all get into the habit of using implies—the idea that prosperity is something which can be engineered for it by financial arrangements; that its economic progress and development wait upon the acts and upon the nod of governments, and that it is within the power of any government to set a specific rate of advance and guarantee by their policies that it will be achieved.
The creative forces in a nation lie in the people themselves—in their determination their effort their hopefulness their thrift their readiness to venture and to change only in proportion as they show and apply those qualities can the economy advance The truly creative policies are the policies which enable the nation to put forth the effort and to take the decisions upon which alone, the rate of its advance depends. It is this conviction which unites all hon. Members on this side of the committee and the converse which is represented by the party opposite, lies the battlefield on which, this year, we shall be contending for the mind and for the heart of the nation.

Mr. Roy JENKINS: The third in an recent series of articles in The Times contained the following sentence:—
the essence of the conservative case is that the gentleman in whitewall does not know best i.e., never (except by accident) knows best.


It is obvious, having listened to the right hon. Member for Wolverhampton, South-West (Mr. Powell), that he regards the Chancellor as very much in the centre of Whitehall, although occasionally accident-prone. However, I thought that the speech of the right hon. Gentleman, who was in powerful voice, gave us more indication how the remainder of the time of this Parliament might be filled up than did that of the Chancellor yesterday.
I am sure that the right hon. Gentleman could develop his ideas at considerable length. Being a great admirer of his articles in the Sunday Times, I filled in the interval to what I think was rather better purpose than going to the other place by looking up a quotation from an and interesting article that he wrote a little time ago about the art of public speaking. He said:
Certainly continued and regular practice is as necessary to a regular speaker as to a professional singer or a violinist. One notices immediately the slight falling-off in fluency and command when one has not been speaking frequently enough.
The right hon. Gentleman continued:
No doubt everyone has his own happy mean".
I am glad of that even though I do not always associate the right hon. Gentleman with happy means. He then said:
Personally, I find three speeches a week is about ideal—neither so many as to make for hack work, nor so few that concert pitch is lost 
I am sure that it is a great comfort to the Government, the Chief Whip and others to know that henceforth we may expect to hear from the right hon. Gentleman up to three speeches a week during the current Session. I shall greatly look forward to them, because I think that there are a number of points on which he was able to touch today only in outline, and if he were to fill them in with more detail it might give them, at least to me, rather more meaning. This afternoon, despite his normally cogent use of language, I found it difficult at times to follow what he meant.
But the words which he used and the sort of policies he recommended bear extraordinarily little relation to the economic world in which we live or in which we are likely to live, extraordinarily little relation to how this country

will be governed over the next few years and also extraordinarily little relation to how any advanced democratic country anywhere in the world is governed at present. There is no substantial body of opinion anywhere which accepts his view, and therefore, even if I come back to him again later, I do not propose to argue these matters in great detail.
There are only two points which I want to raise in relation to his speech. First, the right hon. Gentleman, as we all know—we have been left in no doubt about this—has one of the most acute consciences in the House. Yet he was in the Government for three-and-a-half years, and a member of the Cabinet for a substantial part of that time, under the right hon. Member for Bromley (Mr. H. Macmillan) when, as I understand it, the Government were carrying out, admittedly rather weakly, fitfully and belatedly, policies which the right hon. Gentleman regards as complete anathema.
I understand that the main economic achievement of which the Government claim to be proud is that they have set up N.E.D.C., about which the right hon. Gentleman has been very disparaging. They also made some belated and weak attempt to do something about regional planning—and we know what the right hon. Gentleman's views are about that. I wonder how it is that he stayed so long accepting Cabinet responsibility for these policies which he apparently regarded as absolute nonsense. He must have listened with acute embarrassment to previous Budget speeches. Secondly, knowing his views and how opposite they were to what the Government were claiming to do, I wonder how it was that he was kept in office—and very important office at that—for so long by those who apparently had an entirely different approach to our present economic problems.
I have a few more things to say about the right hon. Gentleman towards the end of my speech, but in the meantime I want to turn to the Chancellor and the Budget. Yesterday we all thought that it was a dull and flat Budget, and I do not think that anybody's views have been changed about that in the 24 hours which have since gone by. It was one of the strongest arguments which one has heard for a June election rather than an October election. It seemed to me that,


having been defeated in the Cabinet and not allowed to have an earlier election, the Chancellor was carrying on his argument in public when he presented his Budget and was trying to show the Prime Minister how unwise it was to have forced the alternative choice upon him.
At the same time, I admit that this is a difficult year, at this phase in the trade cycle, for any Chancellor of the Exchequer—a year in which perhaps no great change is required in the total level of demand, a year in which, if anything, one has to deal with the moderation of a very strong expansionist drive. At the same time, it was a year which called above all for two important approaches. First of all, just because there was no great need for the Chancellor to do much in terms of adjusting the total demand, it was a year for fiscal imagination and for recasting many of the old, out-of-date, unfair aspects of our taxation system. Yet what was extremely noticeable was the fact that the Chancellor shied away from every one of those problems. He did not even mention many of the major problems, and even when he mentioned them it was only to say, "Maybe somebody will deal with this at some stage in the future".
Secondly, this is a year in which it is necessary to attempt the admittedly delicate operation of controlling the boom without snuffing it out as dismally as the preceding ones have been. It is a year for ensuring that there is no repetition of what happened in 1955 and last time, when it took us three years or more to recover from the effect of snuffing out the boom. It was not until the summer of 1963 that the productive forces of the economy began to recover from what the Government thought had to be done after 1959–60.
The problem which should have been in the forefront of the mind of any Chancellor at present is, "How can we make it different this time? How can we prevent the boom from having the result which it had last time?" So far it does not show many signs of being different from the booms which we have experienced several times in the past. It is a great tragedy that in a year when these two major problems confronted the Chancellor and the Government, two major problems demanding, above all,

new departures, we have a Chancellor and a Government whose one desire is to cling to their moorings as long as they possibly can and who are completely incapable of moving off in a new direction.
The Chancellor referred to a number of problem; which were involved in trying to see that we did not have this dismal repetition of old difficulties. But he did absolutely nothing about getting to grips with them in his Budget. What were those problems? Let us take them on the basis on which he dealt with them himself. First there is the incomes policy, which he put in the very forefront of the problems facing the country at present. I understood him to take the view that incomes policy was not at present being successful and that he was not satisfied with what had happened. But he made no attempt to approach the problem of how the Budget might have helped here. He made no attempt, for instance, to discuss the proposals p at forward, not in particular from these benches but in the Economist six months ago, for a specific form of taxation, called an incomes equalisation taxation, for dealing with what, after all, is the major problem about getting voluntary acceptance of an incomes policy.
The major problem is the fears on the part of the trade unions—and these are very real fears, on the basis of all experience—that if they accept an incomes policy, profits and dividends will go ahead faster than wages. That has happened in the past and is happening at present. By this proposal for an incomes equalisation tax we might deal with the problem without falling into the excessive rigidity of limiting individual dividends, which penalises the fast growing companies. What is proposed is an additional tax upon dividend incomes varying not with the dividend income from a particular company but with the extent to which dividends as a whole move ahead of hourly wage rates.
At the end of each year the position would be looked at and it would be seen what had happened in the preceding year and whether it was necessary to impose or remove an additional tax of this sort. This is an extremely constructive proposal, which was put


forward over six months ago and which would go far towards dealing with the root of a problem which the Chancellor himself says is an absolutely major problem confronting this country. There was no indication that his mind was upon this or that he had thought about a matter of this sort.
What is the second problem? The Chancellor did not refer to this—

Sir Harmar Nicholls: Before the hon. Gentleman comes to the second problem, may I ask whether we are to understand from his words that he is advocating this special profits tax, however much he ties it up with an article in the Economist? He has criticised my right hon. Friend for not having taken advantage of a rather quiet period in the fiscal field to deal with the middle of the boom. Is his recommendation thus far that, in addition to what has been done in the Budget, he would have introduced a special profits tax, which would be an extra burden on industry, however it was applied? Is that what he is saying specifically?

Mr. Jenkins: I am saying that I would recast the whole system of company taxation, and even the Chancellor wanted to do something about that. I am saying that this, as part of the general measure of tax reform, is what I would like to see done. I should like to see the question of capital gains looked at again, and an effective tax brought in there, but as part of this general scheme I should consider seriously—and I believe that anyone with a responsibility for tax affairs at present ought to consider very seriously—constructive proposals of this sort for dealing with an extremely difficult problem—

Sir Harmar Nicholls: The hon. Gentleman is advocating it?

Mr. Jenkins: Of course I am advocating it as being a serious thing which should be looked at constructively. Surely the hon. Baronet is not so foolish that he thinks one cannot put forward ideas, or say that these are important ideas which one believes might well be looked at, without committing oneself in every detail. I am bound to say that all our debates would

be as dull as the Chancellor tried to make this one if that were to be the rule which had to be applied in these matters.
The second problem is the question of the regional imbalance in this country and the fact that we are getting to a state in which labour conditions in the South-East are very tight, and also to some extent in the Midlands, while there is still a great deal of slack in other regions. This is something which is causing the Chancellor to put on the brakes with a much higher national total of unemployed than he would have if employment were anything like spread out throughout the country. In these circumstances it would have been desirable to look at the possibility not merely of going ahead far more vigorously with a regional development programme but also at fiscal means of helping to deal with this problem.
There is a lot to be said for a differential employers' National Insurance contribution; a higher one in regions where there is a labour shortage and a lower one in regions where there is chronic unemployment. This, I think, would have been extremely well worth consideration by a Chancellor who was not at the end of his tether, but was looking and thinking about the problems of the future.
There is a third problem and one the Chancellor mentioned a great deal. It is the problem of savings, the attempt to moderate consumption demand by savings, among other means. I should not wish to criticise in detail what he did in the way of re-vamping different issues of savings bonds, but I think it unlikely that it will make much difference to the total volume of personal savings. It might make a difference to the way in which people hold particular savings and also help certain technical problems of Government financing. But I do not think that it comes to grips with the problem of savings at all. Had we had a really imaginative recasting of our taxation system in which loopholes were closed, capital gains dealt with effectively, and a small annual capital tax considered, it might alongside this have been possible to come to a real remission of taxation on people who wanted to save a substantial part of their income. This


would have come to grips with the problem and would not have been merely playing with it. These are three ways in which it seems to me that the Chancellor could have faced the real issues which confront the country at the present time rather than producing this tired, stop-gap Budget.
This is, above all, a Budget of missed opportunities, leaving us, as was said by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), increasingly sceptical about whether there is any difference between this boom and past booms; whether we have made any substantial progress in putting the economy in better shape in the time that has gone by. What, after all, is the difference between the present Chancellor and his predecessors?
Regarding the presentation of the Budget, I think that the present Leader of the House was a ball of fire compared with the Chancellor as he appeared yesterday. We know that the Lord Chancellor of the time said of the present Leader of the House, when he was Chancellor, that unfortunately there were few indications that he ever thought deeply about the great problems of our time. I do not know what he would say about other Chancellors.
The present Minister of Defence, probably realises that he allowed the right hon. Member for Wolverhampton, South-West to do too much thinking for him and now he greatly regrets that he ever allowed that to happen. I am sure that the Foreign Secretary thinks deeply, but whether about the problems of our time one never quite knows. The present Chancellor, too, may have thought deeply. I am sure that he has the ability to do so, but, if he has, he has not shared many of his thoughts with the Committee, or allowed much of the results of his thinking to seep through into his Budget.
In another of his Sunday newspaper articles—a very recent one, last Sunday—the right hon. Member for Wolverhampton, South-West accused the Chancellor and the Government as a whole of introducing Trojan horses into the economy and "working for the barbarians"—I think that was the phrase which he used. I am bound to say that if the present Chancellor is working for

the barbarians, at least he is not working very hard for them.

6.38 p.m

Sir Edwin Leather: One is naturally tempted by the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), who has expressed his personal opinions and innermost thoughts about one's right hon. Friends, to reply by dealing with the Opposition Front Bench. However, I think it is better left to Private Eye rather to debate it in the House.
I should like to follow the hon. Gentleman in his discourse about the Economist idea of an incomes equalisation tax, but I freely confess my inability to do so. I did study these articles very carefully, and I agree with the hon. Gentleman that when one first reads them one thinks, "Gosh! Here is a new and a fresh approach to something which we have all been looking for ". That induces not only hon. Members on both sides of the Committee, but people in nearly every country in the free world. We have been looking for some new basis by which we might make an incomes policy appear fairer to all people. This was very encouraging. Not having had the academic and economic education of the hon. Member for Stechford, I confess that the more I tried to work it out the more confused I became.
Earlier today, the Leader of the Liberal Party showed his great experience by casting about in Keynes' General Theory wits some knowledge and the gay abandon which I am sure that my right hon. Friend the Member for Wolverhampton, South West (Mr. Powell) brings to the General Theory and also to Frazer's Golden Bough. I confess that I never got past the first chapter in the General Theory. The thing I found most confusing about it was that whenever Keynes, like the Economist, was about to make the most abstruse economic statement, he always started by saying, "It is, of course, obvious that—". From there on to me it read rather like Beachcomber in the Daily Express. I quite follow the idea that the hon. Member for Stechford put forward. I agree that it would be interesting to debate it, but the more one tries to work out the sums the more


hopelessly impracticable it seems to became.
The hon. Gentleman agreed—I think that we would all agree—that the Government's task at the moment is to try to keep the economy steady without snuffing out the boom. This is what we would all like to do. Experience, both in this country and in every other Western country since the war, would lead one to take a somewhat sceptical view of the suggestion that any of us are yet clever enough to know the answer.
My right hon. Friend the Member for Wolverhampton, South-West, whatever he may have said in articles to which the hon. Gentleman referred, made a speech today with which I could wholeheartedly agree. I envy my right hon. Friend's ability to make it in the cogent and delightful way in which he did. I would like to take up the theme with which he ended by saying that it is false and dangerous to mislead the country into thinking that anyone in the House of Commons, even the Leader of the Opposition, is so clever that he can work out some formula policy and pass some clever law, get Bank Rate and Public Works Loan Board and net borrowing rate at exactly the same level, and then everything will go just like clockwork. Life is just not like that. I believe that one of the falsehoods, one of the dangerous things that has been done in this country very much in years since the war, has been the tendency, for the sake of simplicity sometimes, to oversimplify—to over-clarify, if that is not a completely Irish expression—the problems with which we are dealing and reduce them to bare statistics and graphs, in such a way that we possibly mislead ourselves and do harm rather than good.
I do not want to make a party point out of this, because I think that it is serious, but I am bound to say that when it comes to hurling off statistics to prove almost anything under the sun, and usually the most unlikely thing that anyone expects at any given moment, and when it comes to pulling out so-called league tables and constantly trying to persuade the British people that everything is dreadful, there is nobody in public life to compare with the Leader

of the Opposition. He has made a speciality of this technique for many years. However, I believe that it is extremely dangerous and misleading.
My right hon. Friend the Secretary of State for Industry, Trade and Regional Development and President of the Board of Trade dealt at some length with statistics which the Leader of the Opposition used yesterday in talking about the rise in rents, dividends, wages and so on. By selecting certain years—admittedly it was twelve years, not one year—and by selecting the twelve years which suited his argument, the Leader of the Opposition came to the conclusion that wages and rent had had an absolute field day under Tory Governments, while wage and salary earners had been positively down-trodden.
We all know that this is not true. We all know that had almost any other twelve-year period been selected precisely the opposite could have been proved. I repeat that this technique is misleading and dangerous. It may be very clever, it may make debating points, and it may make one's own supporters laugh, but I believe that it is extremely dangerous. I am certain that, if the Leader of the Opposition and any of his hon. Friends are at any time in the dim and distant future entrusted with the Government of this country, they will very quickly discard this kind of thinking for the fallacy they must know very well it is.

Mr. Walter Monslow: Would not the hon. Gentleman agree that rates, to which he is now referring, have increased six-fold in the London area during the last year?

Sir E. Leather: I am not a Member for the London area, nor is the hon. Gentleman.

Mr. Monslow: I live here and I am speaking from personal experience.

Sir E. Leather: I could not accept for one moment that rates have risen six times—

Mr. Monslow: Rents.

Sir E. Leather: I have a flat in London, but my rent has not risen for about seven years, so obviously I have been luckier than the hon. Gentleman. It would not be remotely true to say


that rents over the whole London area have risen by six times. Of course they have done no such thing. One rent may have risen by six times. This is arguing from the particular to the general, with respect to the hon. Gentleman, in a way that produces a completely misleading impression. This is the very point I am trying to make. Taking one figure out of context and then saying that it applies to everything is like the old statement—Pierre has a beard. Pierre is a Frenchman. Therefore all Frenchmen have beards. This makes nonsense of statistics.
The Leader of the Opposition over the last few years, and the hon. Member for Cardiff, South-East (Mr. Callaghan) today, have trotted out the same league tables to prove to us that Britain, the United States and Canada have been doing far worse than any other country in the world over the last fifteen years and that our economies arc all stagnating. I happen to know a little about all three of these countries. The suggestion that for the last few years we have all been stagnating, whatever statistics may be produced to prove this mathematically, completely belies the evidence of one's own eyes wherever one gees in a period when more houses have been built, more schools have gone up, more motor cars have been sold and when more prosperity abounds than has ever before been experienced in these three countries. To say, despite all this, that these countries are stagnating, to try to persuade people that there is something radically wrong with them and that everything is going badly, is, to use the words of my right hon. Friend for Wolverhampton, South-West, both dangerous and false. It creates a completely wrong impression and it is done by producing statistics eclectically to prove a debating case at any given time.
On television not long ago the Leader of the Opposition made the absolutely broad and sweeping statement that, if in the last five years the Government had followed the policies he had been advocating, the gross national product would be 3,000 million times higher than it is and, therefore, everything we wanted to do could be financed out of that. He must know perfectly well that this is simply not

true; it is a complete mathematical abstraction.

Mr. Douglas Houghton: With respect to the hon. Gentleman, the figure was not 3,000 million times.

Sir E. Leather: I did not say "times". I said "pounds".

Mr. Houghton: The hon. Gentleman said "times".

Sir E. Leather: I apologise. I meant £3,000 mil ion. I am grateful for the correction. This is a pure statistical abstraction The hon. Member for Cardiff, South-East castigated my right hon. Friend the Chancellor of the Exchequer because there were a lot of "ifs", because he had said if wages do not rise too rapidly, if export prices and import prices remain stable, and if a lot of other things. The hon. Gentleman hurled this off with great distaste. Precisely all the same "ifs", apply to the kind of statistics that the Leader of the Opposition produces and to the completely hypothetical statistical abstraction whereby he tried to persuade millions of viewers that, if we had followed some other policy, everything would have been lovely.

Mr. Monslow: My right hon. Friend was dealing with production, too.

Sir E. Leather: Of course he was dealing with production. That makes no difference.

Mr. Monslow: Does it not?

Sir E. Leather: It does not. I suggest to hon. Members opposite that even the United Nations statistics on production can be desperately misleading. Hon. Members opposite mislead themselves if they maintain that because the statistics are produced by an independent body they must be absolutely right.
Perhaps I can illustrate this in a way that is relevant to the Budget proposals. It could well be—and this is certainly within the realms of the sort of reality the Leader of the Opposition likes to argue—that one might reach a position in which, for reasons best known to themselves, the British people suddenly enormously increased their consumption of cigarettes and gin. We should then end up by the United Nations, the


London and Cambridge Statistical Review and so on solemnly assuring us that the gross national product had risen by an enormous figure. According to the theory of the Leader of the Opposition, that would be a marvellous thing. The truth about it might be, however, that the British people were drinking themselves into delirium tremens and that the lung cancer rate was going up appallingly. Despite this the production statistics would show an enormous improvement.
Not only are statistical points of the kind I have described adduced by the Leader of the Opposition, but sometimes he takes them through to the last ·1 of a decimal place. If one speaks with the people who compile these statistics one learns from them, when they are under pressure, that the margin of error allowed by them is anything up to 10 or 12 per cent.

Mr. Maslow: Does that apply to company balance-sheets?

Sir E. Leather: Not for an individual company balance-sheet. The statistics about which I am speaking and which are produced by Government and international organisations represent the compilation of millions of sets of figures and individual figures—not balance-sheets as such—and produce results from samples which contain a wide range of error, particularly in the vast sphere of the activities of private companies, small traders, shopkeepers and so on. To say that one knows the answer to a given problem as a result of studying the figures, considering that they allow for a wide margin or error, is sheer delusion.
Here is an illustration from an experience I had. I vouch for its truth, although it would be wrong of me to divulge the name of the organisation concerned. It will be within the recollection of most hon. Members that when the 1959 General Election campaign started the graphs showed the Conservative Party with a lead of about 7 per cent. During the course of the campaign—I can see the headlines on the front pages of the newspapers—each day the graphs went down and down. On polling day nearly all the graphs agreed that the lead was 1 per cent. I recall colleagues in London who were con-

cerned with these things asking me each day on the telephone, "What is happening in your area?" Each day I would reply, "I do not know what the London newspapers are talking about". I had to say that because the canvas returns each day showed no change and I could not understand how the statistics could possibly show such an enormous drop.

Mr. Charles Fletcher-Cooke: I would remind my hon. Friend that among the questions which are asked of the public is this favourite one of mine, "Are you satisfied with Harold Wilson as the Leader of the Opposition?" That question is frequently asked, in those very terms. When I am asked I always reply, "Yes".

Sir E. Leather: I am grateful to my hon. and learned Friend for that observation, although it is not the point I am making. I am concerned with an extremely important matter, and it is because I regard it as so important that I have the temerity to delay the Committee for this length of time on this issue.
When the election was over I comcluded that I must have been ignorant of something. I wrote to the managing director of an important statistical organisation and asked, "Could I have this explained to me?" I was invited to lunch. I went along to the luncheon expecting a stimulating and fascinating argument, particularly since this is a matter of national importance. Remember that all sorts of people in many places—not just the Stock Exchange and international bankers, but the bookies and others who had been winning and losing by risking their money on the way the graphs were going day by day—had been concerned with the changes in the graphs.
Hon. Members can imagine the astonishment I felt when, having been introduced to the learned gentlemen at the lunch, they told me, "There is no argument about it; we were wrong". I said, "What on earth do you mean"? to which they replied, "No, we were just wrong"—and they told me that it is a well known fact that the recognised error in samples of that sort was 3 per cent. "On the day of the election we were all so pro-Tory that we interpreted the whole of the 3 per cent. in your favour,"


they told me, "which made 7 per cent." They agreed that the sample figures had not varied by a fraction throughout the campaign and that each day they considered that that could not possibly be true. So they altered the graph, although there had been no variation the whole time.
That is a fair example. All the other big statistical organisations, including the Sunday newspapers and reputable weeklies made the same mistake. They were, in fact, dangerously misleading the public, and I implore hon. Members opposite to give some consideration to the deplorable weakness of sample statistics and carefully to consider whether or not they prove anything before using them. I would not suggest in what part of the House of Commons the hon. Member sat who wrote that classic book, How To Lie with Statistics, but I commend it to the Leader of the Opposition, if he does not already know it by heart.

Mr. Houghton: The example which the hon. Gentleman has just given concerned statistics based on the collection of sample opinions as against the collection of facts, which surely is the basis of statistics from the United Nations and similar sources.

Sir E. Leather: If the hon. Member wishes to consider the mathematical estimates sent in by people throughout the world as facts, he is welcome to do so. My experience causes me to consider them with the greatest suspicion. In this wonderful book, How To Lie With Statistics, this example is given:
The statistics for 1958 prove conclusively that there was a direct relationship between the increased consumption of rum in Haiti and the increased number of Anglican curates in Devonshire.
That statement was perfectly true. They had both risen by 5 per cent.
There is another good factual example which the hon. Member for Sowerby (Mr. Houghton) might like to mull over. It concerns my catching a train. If the train leaves at 6 o'clock and I get there at 5.50 I catch it in comfort. If I get there at 6.2 I have missed it—but statistically I arrived on average at four minutes to 6 o'clock both days and caught the train both days. [Laughter.] With respect to hon. Members opposite,

this is not carrying the kind of league tables and production figures the Leader of the Opposition likes to use one bit further than he does, if one gets over the glitter of the brilliancy of the debating and solemnly works out what the figures really mean.
The hon. Member for Cardiff, South-East began his speech by boldly saying that he was going to give the Opposition's proposals. At the end of 45 minutes no proposals had yet been given. It is perfectly true, of course, that he was in a very great rush in the last four minutes, and hurled out a whole list of proposals which, as my right hon. Friend the Secretary of State for Industry and Trade pointed out with great clarity, were all old and had been dealt with t therefore. Above all, none was likely to make the slightest contribution, as the Leather of the Opposition said yesterday they must, to the immediate economic conditions in the country. That was the bull point in the right hon. Gentleman's speech yesterday, but nothing that either he or his hon. Friend the Member for Cardiff, South-East said had the s lightest relevance to the country's economic position.
The hon. Member for Cardiff, South-East hinted—he was, of course, much too careful to say that we should do so—that we should go back to the classical Socialist formula when they want more money, and tax it out of companies. He tried to prove by statistics—I though that they were "phoney" statistics, but they satisfied the hon. Gentleman and he was very pleased with them—that while taxation of companies had proportionately gone down taxation on individuals had proportionately gone up. Again, that is true, but the hon. Gentleman knows perfectly well that it is largely I rue because the number of those employed in industry has increased enormously in the last few years and their individual earnings have also increased enormously in the last few years.
But does the hon. Gentleman really want us to adopt his own corollary at a time when this country's taxation of companies is still amongst the highest in the world, when we are still taking between 50 percent. and 52 percent. from all companies—

Mr. Houghton: No.

Sir E. Leather: With great respect, yes. There are exceptions, of course, but the average rate imposed on most businesses is still of the order of 50-odd per cent.—

Mr. Houghton:: Gross.

Sir E. Leather: All right—gross; but 50 per cent. is still cash out of the companies' pockets.

Mr. Houghton: Perhaps the hon. Gentleman will permit me to point out that the difference between the gross and net figures in company taxation is accounted for by the fact that companies deduct tax at the standard rate from distributed dividends for which they do not account to the Inland Revenue. They retain it, and it is therefore, a net subtraction from their taxation.

Sir E. Leather: I have been involved in company taxation for quite a number of years. Technically, what the hon. Gentleman says is perfectly true, but the net result is still the same, and I still put my same point. First, the corollary that the Government have been sheltering companies at the expense of individuals is completely untrue—and, again, arrived at by a statistical abstraction. Secondly, even if it were true, are the Opposition really prepared to tell us that they think that this is the moment—when they are talking about encouraging industry and blaming the Government because British industry is not spending fast enough—to whack on more Government taxation? That is the only possible logical conclusion of the argument advanced by the hon. Member for Cardiff, South-East, and it leaves one believing that there was no logical conclusion to his argument at all but that it was his painful duty to get up and say something.
The Budget is certainly not spectacular. No one likes putting any taxes up but, taking the point made by the hon. Member for Stechford, that we must try to keep the economy on balance without snuffing out the boom, and after listening all yesterday and today to leaders of the party opposite, I do not believe that anyone can be in the slightest doubt that not only the best but the only method of doing this that has yet been put forward

is that put forward in my right hon. Friend's Budget proposals yesterday.

Mr. A. Woodburn: Before the hon. Gentleman sits down, he has made great play with my hon. Friend's reference to the taxation of companies and the taxation of individuals and with the fact that a large number of people now pay tax who did not pay it before. Progressive inflation means that people who, under the old gold value of money, were regarded as too poor to pay tax are now being roped in for taxation because inflation brings them into the taxation range. That is not necessarily indicative of an increase in real income, but simply means that taxation is being steadily extended. I am sure that the hon. Gentleman will not contend that the £100 million that the Chancellor proposes to raise should be found by people and not by companies, and that companies should escape altogether.

Sir E. Leather: With great respect to the right hon. Gentleman, what he says about wage earning and taxpayers is just not correct. It is not correct to say that poor people pay more taxes. The truth is that the minimum below which people do not pay tax is at a vastly higher level than ever before. The people in the lowest income groups do not pay tax at all, and the greatest problem is how to benefit them. If they do not pay Income Tax, whatever is done about that has no effect on them. That is the problem.

7.6 p.m

Mr. David Ginsburg: As a practising statistician and economist I listened with growing incredulity to parts of the speech of the hon. Member for Somerset, North (Sir E. Leather). His views on statistics sounded as antediluvian as were the views on economics expressed by the right hon. Member for Wolverhampton, South-West (Mr. Powell) with whom the hon. Member appeared to align himself. I should very much enjoy spending some time this evening debating statistics with the hon. Member, but I do not think that the Committee would like me to go too far into this rather esoteric field.
There are two witnesses in support of statistics I would mention. One is the former Prime Minister, the right


hon. Member for Bromley (Mr. H. Macmillan), who introduced quite substantial reforms into our statistical services in 1956 because, when Chancellor, he said that he was finding it very difficult to steer the economy when statistics were late, and that it was rather like looking up the trains on the basis of an outdated Bradshaw.
If the hon. Member has any further doubts about statistics, we had a very interesting knockabout performance by the Secretary of State for Industry and Trade, and a powerful performance at times. Perhaps I should take the hon. Member's advice, and assume that that was simply a case of statistical manipulation and that I should not believe anything that the Secretary of State said. After all, the right hon. Gentleman was using the Government's own statistics. I will leave that subject for the time being, however, and turn to the Budget.
For all the Budget's repetitiveness and apparent stodginess the Chancellor is entitled to have it judged in economic terms. I am probably not the only hon. Member who is prepared to give the Chancellor's character the benefit of the doubt, which is saying rather a lot in relation to this Government. The Economist last week wrote this about the right hon. Gentleman:
If the Chancellor makes any bad mistakes next week, they are likely to arise from economic misjudgment rather than from political venality.'
That being so, the fact that this is a dull Budget does not mean that we should not be alert to false diagnoses on the Chancellor's part, and to the fact that, although he is admittedly rather more efficient, technically, than some of his predecessors, it does not mean that he too, cannot make—or, indeed, has not already made—substantial mistakes.
Before dealing with the economic aspects of the Chancellor's judgments, I wish to say a few words on the politics of the whole affair. The deferment of the General Election has meant, as some of my colleagues have said, the deferment of vital decisions, for instance, about incomes policy. It has meant the deferment of decisions to extend Purchase Tax to cover other goods and services, to which point of view the Chancellor was clearly attracted in his Budget Statement.
It has meant more. It has meant the deferment of any moves to find more efficient ways of taxing gambling and the deferment of steps to seek more sensitive discriminatory fiscal instruments, for instance, ways and means of discriminating against excessive import stocking which would have been a possible line of policy and ways of stimulating growth—such as my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) mentioned—in the North while damping down on demand in the already overloaded South. All these and many other things are clearly much too difficult in an election year although it is quite clear that the House had plenty of time to deal with them.
I return to the economic judgment. There is of course a danger to the balance of payments. I for one wish that the Chancellor had said rather more about how he proposes to keep the imports bill in bounds. I wish, too, that he had said a lot more, because we have heard nothing so far in the Committee, about why our invisible balance is so very disappointing. It is my estimate—a purely statistical estimate, I say to the hon. Member for Somerset, North, but I think a fair one—for the figures over this long time are not quite comparable—that the surplus balance on invisible account was two and a half times as big in the last two years of the Labour Government.
This is a serious state of affairs. I hope that when a Minister replies this evening or tomorrow we shall hear a little more about what has gone wrong in this component of our balance of payments accounts. There seems a tendency in the Government to watch over the progress of visible exports but not to watch this particularly vital component in our balance of payments.
I should like to have heard more also from the Chancellor about the wisdom of the recent liberalisation measures announced by the Bank of England two weeks ago, liberalisation measures at a time when it is quite clear from balance of payments figures that outflow of capital is already heavy. Nevertheless, I am at heart an out-and-out expansionist. From that viewpoint I am personally glad that the Chancellor did not venture to cut demand by more than about £100 million. These I concede are exercises in judgment; I agree


with the Chancellor. They are as significant psychologically as—forgive me for using the word again—statistically.
However, to my way of thinking there are risks even in what is being done, mild though the Chancellor's actions seem to some people. What he is proposing to do may prove to be too harsh. Lord Amory, for instance, when he was Chancellor was criticised for being too mild in his 1960 Budget, yet it is a fact that even Lord Amory's actions brought the economy to a halt before the more punitive methods of the Leader of the House took effect. Once again I quote from the article in the Economist on the question of the 1960 Budget and its moral for the present time. The leader writer wrote:
Modern economic computers can sometimes badly overestimate the exact amounts of tax increases that are really desirable in times of boom, because nobody has yet devised a science of gauging the way in which a boom mentality among consumers can quite suddenly be deflated.
It is, for example, possible that the Chancellor was over-cautious about the tobacco revenue. He said that he hoped to get £55 million from it but he might get the whole £100 million which the Customs and Excise estimated was possible. There are certain risks even in the modest lengths to which the Chancellor has gone.
I was particularly struck by his argument that he chose as his remedy an increase in indirect taxation because its effect was speedy. That is quite right, but it is then also interesting to take up the argument, why did the Chancellor and the Government not recognise in the summer of 1962 and the Budget of 1963 that the quickest way to deal with unemployment and the stagnant economy was to use the Purchase Tax Regulator or to reduce indirect taxation in some other way? Instead, the Chancellor relied to a large extent on methods which, however good in themselves, only moderately increased demand in 1962 and early 1963, but which have caused big increases and will cause big increases in demand in 1964 and 1965.
There is a danger in attacking consumers' expenditure to the exclusion of everything else, which of course is the policy the Chancellor is adopting. It is true that consumer expenditure is the

largest claimant on resources in the economy. It is, therefore, right that the consumer must pay his full share if sacrifices are required. But let us also remember that not all the bottlenecks which are developing in the economy, and of which there are signs, are in the consumer goods industries. There is very good evidence that some probably have spare capacity. The National Economic Development Council, for instance, implied that recovery in the wool textile industry with which my constituency is concerned, was held up by a deficiency demand in 1962. This sort of situation of deficiency of demand in which cyclical factors play a part can easily return.
The Chancellor also spoke proudly of his public expenditure programme. Of course no one in the Committee wants to cut it, except possibly the right hon. Member for Wolverhampton, South-West, but it is an important claimant on demand. Like my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) in his article in the Financial Times and in his speech this afternoon, I should have expected to have heard from Ministers some words about the need to avoid waste and overlapping in Government expenditure. There is no doubt from the many reports which have recently been published that the Government's housekeeping could be far more efficient. If their housekeeping were more efficient it would not be so necessary for the Chancellor of the day to press his tax increases so heavily on consumers.
One reason why I hold the view that the pressure on resources and the economy has been exaggerated and is not so heavy as it was in 1959–60 is that there are still—quite apart from the unemployment figures which, as one of my colleagues pointed out this afternoon, are higher than in 1959—reserves of manpower in the country. Unemployment is only a partial indicator of the position, the tip of the iceberg, perhaps. The employment figures, which should also be considered, are up. But they are up by only about 100,000 in this period of boom, for the whole of 1963. In the whole of 1959 the employment figures rose by 27,000, at a time when unemployment was lower than it is today.
Judging by their Economic Report, the Government are, clearly, very puzzled by this development and cannot quite explain it. To my mind, the concealed unemployed, married women, retirement pensioners and so on, are not yet flocking hack to the labour market. This is certainly true in many of the older industrial areas. I mention this to emphasise that, in constituencies such as mine, we are, if anything, as concerned about what the experts call concealed unemployment as about actual unemployment. For us it is as important that opportunities for employment should increase and be broadened as that the actual statistical unemployment figure should be kept down.
Today, the Secretary of State for Industry and Trade gave some account of his stewardship. It is a very disappointing stewardship for regional development in the West Riding of Yorkshire. It is, perhaps, worth mentioning that the National Economic Development Council forecast a substantial drop in employment in the wool textile industry, about 10 per cent. over the five years 1961–66. The decline is under way. Much of it is due to the higher productivity which we all welcome. Nevertheless, it is a fact that job opportunities are not growing in the wool textile areas. Meanwhile, it is clear—the Secretary of State gave no indication to the contrary—that the Government are doing next to nothing for the wool textile areas. Is the Committee surprised, therefore, that the West Riding of Yorkshire has today one of the highest migration rates to presumably the southern part of the United Kingdom?
The Chancellor had an excellent opportunity in this Budget to go much further with discriminatory regional fiscal devices which would have assisted areas like mine, but this opportunity, although there would have been plenty of time to deal with it in the coming weeks, has been altogether missed.
I come now to a point which is vital in any intelligent discussion of incomes policy. While we have full employment, the problem of equity, as my hon. Friends have already said, is far more serious than the Chancellor and the Government imagine. Many people are still very badly paid in their existing jobs. I notice that the hon. Member for

Somerset, North has left the Chamber, but, nevertheless, I wish to mention some recent Gallup poll figures. I hope that they will be listened to with some—

Mr. Powell: Credulity.

Mr. Ginsburg: —credulity. These are not statistics about political intentions or opinions. They are statistics produced in connection with an article published about the number of people having two jobs. They show that one-sixth of all workers in this country have to do, or do, two job. They show also, on the question of intention—I acknowledge that one can take these figures with a certain amount of moderation—that one-fifth of all workers would like a second job in order to earn more money, if they can. It is interesting to note, also, that the demand for a second job extends to nearly one quarter of all manual workers. This requirement, therefore, is rather higher among manual workers. Making every allowance for all the special problems of the affluent society which, no doubt, hon. Members opposite would mention, it can be said, with some restraint, I think, that the figures do not reveal a very healthy state of affairs.
I realise that the Chancellor would argue that ht. sought in his Budget to be fair in levying his new tax burdens. I go so far as o concede that the structure of indirect taxation today is no longer as regressive as it was before the war. But I ask Ministers when they consider this Budget to look very carefully at the Treasury's figures in the publication Economic Trends on the incidence of taxes and social service benefits in 1961 and 1962. Quite apart from the pensioner housel olds, mentioned by my hon. Friend the Member for Cardiff, South-East, who will unquestionably be hit by the Chancellor's measures, the wage earner earning £10, £12 and even £15 a week will, depending, of course, on the number of children in the household, be significantly affected if increases in indirect taxation are not compensated by action on the welfare side. The Government's own statistics will confirm this.
In this sort of situation, with some wages at that sort of low level, it is very difficult to lecture working people about cost inflation unless or until a greater


sense of equity can be created. This tired Government lack the moral authority to do what is necessary. In due time, they must make way for a Government who will have that authority.

7.28 p.m.

Mr. Charles Fletcher-Cooke: The hon. Member for Dewsbury (Mr. Ginsburg) made a very interesting point about the number of our fellow workers who have two jobs and the even greater number who would like two jobs. I suggest to him that those numbers have a direct relation to the weight of direct taxation. In spite of the skill and cunning of the Inland Revenue, there are undoubtedly more opportunities for avoiding—I will not say evading—tax if a person has two jobs than if he has one. I am sure that if my right hon. Friend had increased direct instead of indirect taxation the number of those seeking two or even more jobs at the same time would have risen considerably.
This is a short Budget, and, to judge from the speeches made on the benches opposite, when the Finance Bill arrives there will be no divisions on it, because no one, today or yesterday, has attacked the Measures proposed to be included in it. I have heard a great deal of criticism about what is not to be included, but I have heard no direct or serious criticism about what will be included. This surely is a most remarkable thing. Here we are in election year. Here we have the Chancellor of the Exchequer proposing to increase taxation by £100 million, and no one on either side of the Committee objects. If one suggested that that was possible at any other time, I do not think it would have held water. This surely must be a great compliment to my right hon. Friend the Chancellor and, to give credit where it is due, a great compliment to the Opposition, too.
Here we are all agreeing to increase taxation and about the method by which it should be increased. Of course, it is a simple method and one which is understood. If we want universities, schools, more teachers and many other things, we must pay for them. That was the basis on which it was put by my right hon. Friend—not on the esoteric basis of skimming off excess purchasing power, but simply on the basis of simple housekeeping. We have to pay for them,

and the best and least painful way to pay for them is out of the little luxuries of life and out of a system which already exists and which does not require the erection of some costly new procedure.
It is true, as many hon. Members have said, that the Budget omits reform of the tax structure. I do not believe that an annual Finance Bill is the right vehicle for reforming the tax structure. It seems to me that a special Bill is required for that purpose, one which can be considered upstairs in Committee rather than on the Floor of the House.
There are several reforms which should be made, but I do not think that they should be made in the annual Finance Bill. All of them, I think, will probably involve a slight diminution in Government revenue. There is the question of merging the different forms of company taxation. There is the merging of Income Tax with Surtax. There is the harmonisation of the expenses of the employed man with those of the self-employed man. There is the scandal, as I regard it, of the joint assessment of man and wife. There are many other things of that kind.
I do not think it is right to say, as the hon. Member for Dewsbury said, that it would be difficult to do these things in an election year. I think that the obstacle to doing them is that the Treasury knows that, if they are done, it will lose a certain amount of revenue, because most of these anomalies work against the subject and in favour of the Treasury. I hope that that is not the reason why we are not to have tax reforms now. I should like to see a special Bill introduced for this purpose, but I dare say that we cannot have it until a bit later. However, when we do get it, let us ensure that it goes upstairs, because tax reform is not in the least linked with an annual Finance Bill, which should be short I am glad to say that this year's Bill is to be short.
I have never known an increase in taxation—which is a very loathsome thing—generally accepted with such understanding not only by this Committee but by the country. The public does not like it, but the public is not objecting to it at all—or only marginally. Why is this? It is not because the public like paying imposts. It is because there is another form of impost


which has attracted people's bile and they have none left for the increase in the price of tobacco, beer and spirits and wine. The public has become startled and shocked by the quite sudden increase in the rates. There are no headlines about that, or not many. There is no drama about it. There are no television discussions between the Front Benches night after night on that subject. Not even the hon. Member for Pontypool (Mr. Abse) puts on his top hat when we discuss that matter.
Yet, this is the subject which is gripping the population far more than the Budget. The only reference to it in the Budget is this mysterious addition in the below-the-line expenditure of £200 million because the Government have accepted some responsibility for loans to local authorities. Presumably, since it is a deficit in the Budget, there should be some reflection of the advantage in local authority finances. But no sign of it has yet appeared in anybody's demands for rates which I have seen. The public was led to believe that when industrial hereditaments were to be partially included in the rating system the burden on the individual householder would he relieved. But that is no one's experience as far as I can see, even in the areas which have been least hard hit.
The sudden increase in rates is particularly loathsome because there is no way of avoiding it. These increases in taxes which have been quite rightly proposed can be avoided. One is not compelled to smoke or to drink. Further, their merit is that they tap a source of supply, in particular, among non-householders, the young, teenagers, and so on, who have money to spend, whereas the rates do not touch them. The ratepayer cannot escape because he cannot move in nine cases out of ten.
I believe also that this is extremely inflationary. One can speak only from experience, and I speak for one of the constituents of Mr. Speaker since he cannot put the case himself. My secretary, who lives in the City of Westminster, has a modest flat, the rates of which have been increased from just under £100 to £163—a rise of over £63 in eighteen months. Tha t is not the end of it. Of course, her wages will have to go up, and I think that my wages should go up since her wages must go up.
This is obviously an extremely inflationary move, and yet we do not devote four days to discussing it. Instead, we devote four days to discussing something on which, by and large, we agree. We have all the paraphernalia of something on which we agree, yet something which is exercising the country's attention and which is enormously resented is barely discussed.
If I had a criticism of this Budget. it would be that nowhere in it is there any sense of urgency about this terrible problem which many of us realised was coming but which has only just hit the public between the eyes. I should very much like to see a new sense of urgency in relieving local authorities of some of their burdens in this matter. This is not something which can be put off. I am afraid that it is something which will overwhelm the Government because of its unpopularity in all parts of the country, although it is more unpopular in some parts than others.
The small measure of relief proposed by my right hon. Friend the Minister of Housing and Local Government is not sufficient. It would help if, at least, we could hive an indication of what sort of matters the Treasury feels that it could take over in due course. Would it be part of the education Vote, or would it be all? If it is part of it, is it a general across-the-board assumption of responsibility or is it by sections? Is it salaries or something on those lines? Is it an increase in the General Grant? That the ratepayer, who is caught in a vice, or so he feels, must be given hope. I believe this to be a vital political reality, because good though the Budget is and excellent though I believe has been the estimate of the amount of extra taxation which is necessary, it does not deal with the subject that is exercising the minds and, I believe, worrying the hearts of the vast majority of our people.

7.41 p.m

Mr. A. Woodburn: I should like to intervene for a few minutes because the subject of inflation has interested me for many years. I have always been convinced that here is a misunderstanding about inflation in the sense that every time there is a tendency for inflation, the Chancellor of the Exchequer seems to


think that he must introduce a general measure of restriction. Inflation does not necessarily happen all over the country at the same time and what is a cure for inflation in the south of England may be an aggravation of industrial trouble in the North, where there is unemployment, under-employment and the need for stimulation and not frustration.
Lord Amory, when Chancellor of the Exchequer, once introduced what he thought was a scheme to combat that. He gave permission to the Scottish banks to continue to issue credit while placing restrictions upon the English banks. There was no restriction upon Scottish banks lending money for development in England, but there was a restriction upon English banks lending money for development in Scotland. This was no discrimination. If it was discrimination, it was a complete misconception of what would happen as a result.
I suggested to Lord Amory that if there was to be discrimination in the issue of credit, credit should be given to people who would develop in the industrial and development areas and to firms who would develop export industries. That was a kind of discrimination in which I could see sense. Merely to say that the Scottish banks could lend to England and that the English banks could not lend to Scotland was no solution to any problem. The main mistake about the general restrictions is that they aggravate the trouble which we want to cure in the North and they do not necessarily cure the trouble that exists in the South.
In the South and Midlands, there are far more jobs chasing men than there are men chasing jobs. In the North, hundreds of children who are leaving school cannot find employment and in some areas we are getting a little of the demoralisation that set in between the wars. This is desired by nobody. Therefore, a method must be devised by which there is discrimination.
Let me give credit to the Government. They have done this to some extent because they have lent money at cheap rates to Colvilles, they have loaned it at cheap rates to the British Motor Corporation and to Rootes and they have also lent money for the starting of a pulp mill at Fort William. This is a

proper thing to do and this is the proper use of the fiscal method for stimulating industry where required. The other method could equally be used in the South by restricting credit where there is over-employment. This would be a balanced and discriminating method of applying the brake instead of plunging down the brake and stopping everybody because somebody is growing too fat in the way of employment and industry.
The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) spoke about rates. There is no question that it is a serious problem in many parts of the country. Local authorities are reaching the point where they will become exasperated and it will be difficult to get them to carry on. A great deal of those rates arise, however, from Government action and one of the Chancellor's defects is that nobody seems to have tackled the question of how far the Government can impose policies upon the local authorities and make them pay the major part of the cost. Until the general grant is altered, every increase in teachers' salaries and in expenditure is bound to go on to the ratepayers. The greatest part of the increased rates in many local authorities comes, however, from the increase in interest charges due to the increase of Bank Rate with a view to applying the brake to the development of industry.
I have heard it said that that is necessary and that that kind of development cannot be physically controlled, but this is nonsense, because no local authority can start any serious development without the permission of the Government, who have complete control over the plans and development of local authorities without increasing interest rates. The Minister of Public Building and Works said the other day that the Government must charge the interest and must pay for their own borrowing. This also is a bit of nonsense. Government borrowing is done through the Bank of England creating credits, and the only increased costs of that are the bookkeeping entries of increasing the credit and managing the accounts for the next 60 years.
I do not know the cost of that—I do not think that anybody does—but it certainly does not go up by the kind of increase in interest rates that takes place because the Chancellor wants to impose


a restriction on development. This is another case which the Treasury and the Government should look into. They should examine what is the real cost of borrowing money, charge the local authorities that cost and no more and not put it up or down according to the fluctuations of a quite different market.
We are told that if interest rates were reduced, this would be a hidden subsidy to the local authorities. If that argument is correct, to increase interest rates is to reduce the subsidy to local authorities. On what ground have the subsidies to local authorities been reduced in recent years through no particular change in the economy except that the Chancellor wants to put a brake on industry?
There are all kinds of ways of controlling development. The hon. Member for Somerset, North (Sir E. Leather) spoke as if there was no possibility of planning and that it was all imaginary. After the war, we had seriously to plan the use the building trade. This was another way of curbing inflation. The Minister of Works had a complete tabulation of the composition of the building trade, its manpower and its capacity. It had to he allocated to different purposes, so much to housing and to the repair of housing. Between them, these two took about 60 per cent. Then, so much was allocated to the War Office and other buildings. The churches were given £1 million a year, which they allocated among themselves. This was an allocation not of money particularly, but money was used to allocate the men in the building trade and the capacity to build.
If people are to be allowed to start building all over the place without any controls, this will mean that when the Government's new programme starts there will be pressure upon the building trade. If it does not inflate wages and everything else at the end of the day, I shall be very much surprised. When the Government have within their grasp the power to plan industry and development, there is no reason why they should not do this in an intelligent fashion and not pretend that it all depends upon pure chance and allow the money to fly.
Inflation also requires a certain amount of flexibility. It is true that the Chancellor of the Exchequer has the difficulty of trying to keep the economy

working on an even keel. The Government are terribly culpable for deliberately provoking inflation before the last two elections and creating a much bigger wave above the line and below the line than necessarily. The Government's business is to keep marching like the governor of a steam engine so that the engine may move at a steady rate all along the line. But if they steam up the engine, make it drive at an enormous rate and then violently put on the brakes, they destroy confidence throughout the country.
The most important factor to industry is steady development. If they know that there is to be steady progress and development people will put their capital into industry and will be prepared to develop and to take risks. But if, following a sudden boom when they put their capital in, within a few months restrictions are again imposed, their capital will be lost. That means that, when the Government return next time, they will not evoke the same good response, before the last election the Government stimulated purchasing to an enormous extent. Directly or indirectly, they induced the banks and everyone eh e to lend money galore. One just handed one's name in and got a loan to buy a car or a house or anything else. The banks went into it as well as the loan companies.
A few months ago the Observer pointed out that the loan and hire-purchase people were meeting in London and that they hold lost about £75 million—I cannot remember the exact sum but it was tremendous—in the boom which had come to nothing. If people burn their fingers and lose a lot of money the Government cannot ask them to do it again. Hire-purchase is, after all, a way of spending the money of the future as well as the money of the past and if people tie themselves up for seven or eight years ahead they have not the resources to take on any more debt—if they are sensible. A Government can work that trick only one or twice.
This is especially important for industry, which must have confidence. This is where the Government have come up against an obstacle which they will be unable to shift. Industrialists have so lost confidence in the Government after the last boom and slump that it


will be difficult to convince them that this is not just a temporary boom again. It is important that some assurance should be given that we are not to rush ahead and then suddenly be stopped and that any progress we make is as steady as possible. To that extent, I think that the Chancellor of the Exchequer, in restricting his extra taxation to £100 million and agreeing that the boom should go on, has contributed to a steady development.
I may have missed it in his speech but I think it would have been wise for the right hon. Gentleman to have told cigarette smokers and drinkers what their money is to be used for. But I did not hear that it is to be used for all these splendid purposes such as building hospitals and schools. I think that smokers and drinkers might feel a little better if they knew that the money was being used for such things.
However, I do not think that there was much calculation in the increase of tax on cigarettes and drink. The approach was obviously designed for a June election. The idea originally was to do nothing at all and the imposition of £100 million more in taxation was brought in so that there could be no great debate upon it, no great resistance and no great resentment. Curiously enough, after a few weeks taxes on cigarettes and drink are forgotten. People forget all about it and drown their sorrows with what they buy with the remainder of their money.
The sad thing is that this is an unfair tax because, obviously, it will deprive old-age pensioners and others of their smokes and drinks unless the Chancellor does something to increase their pensions. I think that everyone agrees that it is not satisfactory to give them coupons with which to buy either drink or cigarettes. Nevertheless, much hardship will be caused among these people by the increase in tax. I know that the right hon. Gentleman does not mean that but it is one of the effects.
It is an unfair tax and it is true that all indirect taxation is unfair. The trouble is that people prefer it to direct taxation. It is rather sad that the most civilised and fairest tax in the world—Income Tax—is disliked by the people. They also dislike the rates. The reason

for their dislike is that they have been completely misled as to what these rates and taxes are for.
People who pay rates get great value for money although they insist on talking about the burden of rates. It is not a burden at all. Let us consider what people get for the rates. They rise in the morning to find clean water available. Instead of stepping outside into mud they step on to concrete pavements. On the roads, the policemen look after their safety. Their children receive education. Their refuse is taken away. Just imagine the cost of hiring people privately to do all these things. What would it cost to the individual in that way?
Quite clearly, buying these things collectively is one of the greatest bargains we get. We get good health. The local authorities prevent us from being poisoned by seeing that food is clean. They look after our sanitation. Pure water is a gift in itself. In some countries one cannot get it. We get it flowing cleanly into our homes.
It is a mistake to talk about the burden of rates. They are a great bargain. Even when we buy a house and pay rates for the services of the community, we are getting a better bargain than we would otherwise. Incidentally, it was not the Labour Party which introduced rates but the Conservative Party. A Conservative Government introduced them over 100 years ago in order to protect ratepayers against disease and the cost of disease. At that time the poor had to be kept in poor houses and obviously it was cheaper to keep them healthy than in a state of disease. It is a mistake to call the rates and taxes a burden.
The hon. and learned Member for Darwen is debating the question as to how much the State and how much the local authority should pay. I agree that this must be examined very carefully, because the State is the institution that can raise money fairly. Raising money from rates on householders is not a fair method of taxation. Many people have suggested other methods but they are all costly and difficult to organise. A local income tax would not be as fair as the national Income Tax and if we had an extra national income tax for local authorities we would merely be returning to the general grant. There are also


the complications of how far the local authorities want to retain their independence and feel that they are spending their own money and are not just being rubber stamp for the State.
Obviously, they must have some control over finance. It is a good rule that, when the local authority spends the State's money, it must also spend some of its own. A 100 per cent. grant system has never worked satisfactorily. A local authority must have a sense of responsibility. I am afraid that the burdens, as they are called, being put upon them now—and it is a burden if they have to carry the whole cost of a national service—are very great. Something must be done about education, for instance, for its cost has not yet finished rising and I am not sure that the narrow basis of rates is sufficient to carry the whole cost.
In some of the sparsely populated counties it is almost impossible to meet the cost and so, through the equalisation grant, the State has become a ratepayer. I think that this system must be developed to a greater extent. If the State becomes a ratepayer it will have a say in spending the money and it must take a bigger share than it does today.
One of the ways in which it can do that is to stop imposing high interest charges on local authorities which have put up the price of a house, over 60 years, from £4,000 to £9,000 in about 12 years. This is a ridiculous situation. It has been shown how impossible it is to expect the local authorities to carry all this on the local rates. It amounts to a decrease in subsidy. It wipes out subsidies so that what the Government give with one hand they take away with the other. This must be dealt with at an early stage.
I would say, therefore, that the Budget has been unfair inasmuch as the £100 million extra that is to be taken is not a very well-balanced deduction of purchasing power. It acts very largely against those who have the least purchasing power. It is no burden at all on the wealthy and therefore to that extent it is a very unfair tax. We believe that it is no use in tempering what might become inflation.
However, the dye has been cast and we shall not be able to discuss the tax. It has been imposed and we must grin

and bear it. So the marvellously generous people—those who smoke and drink—bear a tremendous part of the country's taxation. Yet they bear it smilingly and seem to enjoy it, because they enjoy smoking and drinking away their incomes and do not seem to mind that a large part of it goes to defend the country and, perhaps, to pay a little towards the social services. To that extent, I think that, in this debate, we ought to think them for the way they accept the burdens that are placed upon them

8.1 p.m.

Sir Douglas Marshall: By accident I very frequently follow in debates the right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn), but I have never before heard such flattering words at the end of his speech. I am very glad to know that those who are foolish enough to smoke and those who are so unwise as occasionally to take some liquor are so generous with their cash. I art grateful for what he said, a great deal of which I agree with.
I agree with the points that the right hon. Gentleman made with regard to the regional approach in a number of matters. I think that possibly the right hon. Gentleman would agree that we have never gone so far as we have of late in the regional approach. A point which I should like to stress to the Committee and to the right hon. Gentleman is that, although all right hon. and hon. members quite naturally have a dislike for any policy that appears to be based at times on what has now become commonly known as stop and go, they Trust also realise that if we are to expand and have a growing world market with conditions throughout the world of which we are not in sovereign control, it will almost need a magician to say that there shall not be moments of stop and moments of go. I think that occasionally in the language which is used both in this Committee and outside we are apt to forget that point.
Then again, I think that I am right in saying that the right hon. Gentleman said with regard to this Budget that he thought that it contributed to a steady development. Those were the words, more or less, that he used. I share that


view. It must have been quite anxious thinking for my right hon. Friend the Chancellor to decide what the global figure should be if he generally raised taxation. Nearly all right hon. and hon. Members who, no doubt, read the different papers published just before the Budget, must have realised that there seemed to be more or less a general theme, with very little disagreement, that the Budget would raise another £200 million. Be that as it may, I think we all realise that, whether it is £200 million, £100 million or £50 million, in proportion to the total sum collected in taxes, it is a very small amount.
I think that the Chancellor was wise to select the figure of £100 million. I share with the right hon. Gentleman, and so I imagine would any one else, the view that this will press harshly on certain small sections of the population who are very near the narrow margin of life. But I think that we must also realise that, although we may hope at a later date that this figure will be raised, in purchasing power, from the start of the operation, the old-age pension is now three times as much as it was when the right hon. Gentleman and I were in the House in the 'forties.
The right hon. Gentleman mentioned that he thought with regard to rates that, at the end of the day, we would all see an even far larger figure in respect of education. Surely this thinking must be shared by all hon. Members. If we look at our standard of living, which a goodly portion of the world envies, and then look at the raw materials that we have in this country, the greatest raw materials that we have are the brains of our people, upon which we are dependent. It is therefore absolutely necessary that every opportunity and facility that can possibly be afforded by one generation should be given so that succeeding generations might develop even greater capacity in order to help this country and, fortunately, help themselves.
I felt when I listened to my right hon. Friend the Chancellor yesterday and to my right hon. Friend the Secretary of State for Industry, Trade and Regional Development and President of the Board of Trade and the right hon. Gentleman the Member for East Stirlingshire that not sufficient had been made of three

things. First, it was not just a question of putting a slight brake on with the question of £100 million, but we were also making ourselves dependent upon the savings of the people.
My right hon. Friend's new approach to savings is good, but at a later date we should explore further means of attracting savings, because the provision of savings is one method by which increases in taxation might be avoided. The danger is increasing consumer demand and if that demand can be hived off in savings, the danger is not so great. Not sufficient tribute was paid to my right hon. Friend on that issue.
The right hon. Member for East Stirlingshire rightly said that the money collected is collected primarily for the different things which we all want. More education, more houses, a greater Health Service and greater hospital facilities all cost money. I will not weary hon. Members with figures which they already know, but I pay my right hon. Friend the compliment of saying that if all the figures are added up, we can be reasonably happy about the total, and that he only wanted an extra hundred million can only be due to good administration.
My right hon. Friend the Secretary of State for Industry and Trade came to Cornwall to have a "look see" about the need for further development in that area. We were grateful to him, but I hope that he realises to the full the danger which may crop up. It is that firms starting to develop in development districts may later want to expand, and yet cannot find from the Government to what extent an area may suddenly and smartly no longer be a development district. Lack of the knowledge of what warning would be given may jeopardise development and expansion which might otherwise take place.
For many years, I have hardly spoken in a Budget debate without mentioning our mineral wealth. I still believe that there are many people in the Government and the Treasury who will not accept that there is great mineral wealth still lying hidden in our hills. Help was given to the mining industry—provided that it was in a development district—in the last Budget, but the location of tin does not run nicely and


gently according to the provisions of any Finance Bill. Special financial measures are necessary to help the development of metalliferous mining. Great risks have to be taken. The mines were flooded 50 or 60 years ago and no one knows whether there is sufficient mineral wealth in them to justify the cost of procuring it without having tax incentives.
It is a pity that the leader of the Liberal Party gave the impression, at least to me, that one of the methods which he would adopt to obtain more money would be a slackening of the sovereignty of our defences. This is nothing new or novel. The Liberals said more or less the same thing in 1938. I regret such an approach.
This has been not an exciting Budget—there is no particular reason why a Budget should be exciting—but it has been a sensible Budget which people will understand to give good value for money and from which they will understand that we are still in a process of expansion and that by that expansion and the work of our people—not just the Government, but the people—they can afford to expand all those social improvements which all hon. and right hon. Members sincerely want. The difference between us is how to reach that objective.

8.16 p.m

Mr. Julian Snow: I am sorry that the Secretary of State is no longer in his place, but I am very glad that the Financial Secretary to the Treasury is present, because I know that he has specialist knowledge of exports, the subject to which I propose to address my speech.
Potential exporters must be excused if they are becoming increasingly bored by the exhortations of successive Governments to increase their exports and to devote more energy to that aspect of their business. That does not mean that they should not treat the matter extremely seriously.
But I was depressed by the Secretary of State's speech, because he made two mistakes. First, he did not reply to the challenge of my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) on the relative position of this country in the world's export markets. It is not

good enough and it misleads the public for Government spokesmen to keep saying that our exports are increasing. That is entirely irrelevant unless they are increasing compared with the world position of other exporting countries. It was a pity that the right hon. Gentleman did not respond to that challenge, because the Conservative Press will use an increase in exports to justify the Government's record, whereas in reality our relative export position is getting worse.
Secondly, he emphasised, as other Conservative spokesmen have emphasised, the fact that we are doing good trade with other sophisticated industrialised countries. This may be the case and in its own way it is desirable; but the job of any Government is to plan not for the short-term, but for the long-term economy.
One of the reports which the Government have so far neglected to have examined try the House of Commons is the Plowden Report, the Committee on Representational Services Overseas. There are certain comments in this Report affecting our trade missions and representation in other countries which should have; attracted a great deal more attention from hon. Members in general and certainly from the Government. I was very sorry that neither the Budget speech nor the right hon. Gentleman's speech today mentioned implementing these urgent and valid suggestions which have been accepted by the Government in principle and which are to expand and enlarge our commercial departments abroad.
Paragraph 10 of the Report says:
The strength of our diplomacy depends on and must be related to our economic strength. The survival of Britain let alone her influence, depends on trade".
I have examined the estimates for the commercial Departments for the current financial year on both sides of our overseas representation, but I can see no action being taken on the lines suggested in the Report.
The Government may say that it is a little premature to expect that, but this is an urgent and pressing problem. I suggest that the problem can be summarised by saying that we have to examine the way in which other countries have consolidated their long-term export potential, which we do not


appear to be doing. With other hon. Members, I have recently been to the Far East, and I was extremely concerned at the evidence with which we were confronted of the activities of other nations—I am thinking particularly of Japan—in consolidating their position in the new markets which one day will be open to the world in general. For instance, even before the troubles over Borneo broke out and affected our trade with Indonesia, Japan was exporting to that country about eight times the volume of our exports, and that is only one case.
The comments of the Plowden Committee in paragraph 42 of its Report relate to the Commonwealth, but I think that they are equally applicable to other nations with whom we have been bound in close commercial contact for many years. The Committee said:
We need a system"—
this is an argument to strengthen and co-ordinate the various forms of commercial departments overseas—
which recognises that individual Commonwealth countries have developed regional interests and relationships of their own and cannot regard their relationship with Britain as paramount.
To the old-fashioned, to the Imperialists, to the great enthusiasts for the Commonwealth—amongst whom I include myself—those are rather harsh words, but I wonder how many hon. Members realise that Australia and Japan, in their combined trade both ways, are doing more trade than Australia does with this country.
Until one goes to these far-away places—and I speak in aid of more Parliamentary delegations going abroad—such as East Asia, the Pacific, and so on, it is very difficult to understand how countries in those areas look towards us and examine their own commercial interests. In East Asia, for example, unless we are very careful, we shall find ourselves unprepared for the day when Communist-dominated countries like China open their doors to more trade. Incidentally, the latest reports from China indicate that her sterling asset position may be a good deal stronger because of oil development. The Minister shakes his head.

I draw his attention to a recent article in the Financial Times.

The Financial Secretary to the Treasury (Mr. Alan Green): I was not shaking my head. I was doubting the relevant value of what the hon. Gentleman said. There may be these oilfield developments, and I agree that they will make a difference.

Mr. Snow: It is a matter of judgment whether China's development of her oilfields and the accruing of sterling assets may be of importance to us. Indonesia, on the other hand, is under-developed. Some people say that she is economically misdirected, but other nations are still doing substantial trade with her.
I think that there is a case for co-ordinating our export endeavour from the Board of Trade, not so much towards individual countries, but towards co-ordinating all our efforts in a given economic theatre. I believe that that is very important. If one considers what trade is being done in the Far East and what trade is being missed, and the possibilities open to us, one realises that one has cause for great concern.
Some days ago when I was talking to some people on this subject, I was tempted to refer to the Japanese effort and also to her record of activity in this connection which began in about 1940 when she tried to organise a Far East co-Prosperity Sphere. This has a very sinister connotation, but nothing that I say now should be construed as being hostile to Japan because I think that in her new form, and provided that we do not adopt an antagonistic attitude because of past unhappy events, she can play an important part in developing the Far East. But, bearing in mind that a sinister connotation attaches to the old Far East co-Prosperity Sphere, I believe that unless we are very careful we shall find some sort of Far East organisation for the development of mutual co-operation, with us being left out in the cold, and colour is lent to this possibility by an article in The Times today which reports that Mr. Nixon, who has been to Tokyo, has suggested a Far East Common Market as a counter-balance to a European Common Market. I stress that that is a matter at which we ought to look.
I come back to the point about strengthening our trade missions in our Embassies and High Commission offices abroad. In the Far East there has been an unfortunate failure on the part of our civil aviation industry to obtain a share of the market. For instance, I was not particularly happy to find a British company operating a Pacific airline with American aircraft. We are all also aware of the unhappy story of the failure to obtain a share of the Japanese market with the Trident aircraft.
I have yet to find someone who can explain why the post of air attaché in Tokyo was abolished a few weeks ago, although I understand that that decision has been reconsidered. I suggest to the Government that, bearing in mind the enormous potential for civil aircraft in that area and the developing potential in Korea, Indonesia and China, it would be a good thing to consider the appointment of a civil air attaché, the kind of appointment that is made in other countries, who will specialise in civil aircraft as opposed to aircraft for military considerations.
I am afraid that too many potential exporters and businessmen in this country who come up against Japanese competition—and it is a serious form of competition—attribute the wrong reasons to the efficiency of that competition. Too many of them ask how they can compete against the low wages and poor working conditions in Japan. This is a highly fallacious argument, as the low labour cost argument is out of date.
Why is it that in a country like Japan we do not maintain a labour attaché? We do so in other less economically important countries. In view of the undoubted wrongs that exist in the Japanese labour structure, I should have thought that by the appointment of a labour attaché it might be possible to ensure that we were properly informed about Japanese labour costs; not forgetting that the function of a labour attaché is also to try to bring influence to bear in the country to which he is appointed to improve the labour organisation and practices there; to try to bring those practices which are undesirable—and some of them are in Japan—more into line with Western European practice.
I also found—and I have met this elsewhere in the Far East—that the

working of commercial departments is jeopardised by a shortage of staff. I have put his point to various Foreign Office officials, who say, "Well, you know, we are up to establishment there by comparison with our staff in other countries." I would have thought the yardstick should be, "What is being done by the other major exporting countries", and not what we may be doing in Peru as compared with Tokyo, or in Bangkok as compared with Durban. We must seriously examine what other exporting countries are doing.
The Chancellor referred to the fact that he is shortly going to a meeting of the International Monetary Fund, and that he will there draw certain matters to its attention. There is one matter that I wish he would raise there. If he examines the practice of the Japanese Government on the question of imports—and this has been reported to the Foreign Office—he will find that they have adopted a practice called import Collateral, which is highly prejudicial to this country. It is a practice whereby an import licence is granted for a period of six months, and where a deposit must be paid to ensure that the licence is used within that period. In the case of raw materials exports, which do not come from this country, the deposit is 10 percent. of the value of the licence, but for consumer goods, which do come from this country, it is 35 per cent. This is prejudicial and discriminatory against this country, and inhibits many potential small importers from importing goods from the United Kingdom.
Some time ago I was discussing with a previous President of the Board of Trade the role of the really small British manufacturers, amongst whose number one finds many men running little companies manufacturing highly specialised machinery and equipment. I said that I thought that it was a great shame that no matter low many times the question had been raised in the House by hon. Members, including myself, the Government had taken no real action to try to bring the small manufacturers into our export potential. The reply that I received was, "Well, you know, so many of these s nail businessmen are rather bad businessmen.".
I am sorry that he gave that answer, but because it was a private conversation I will not personalise. This is the


wrong attitude. Other countries bring in small manufacturers as sub-contractors to major exporters. Much more could be done if we had a better survey carried out of the position in this country.
I do not want to end on a controversial note, but I sometimes feel that the attitude of the Government towards small businessmen is similar to their attitude towards small shopkeepers—the feeling that they can be discarded to some extent. This is a great pity. In ignoring the small manufacturers the Government are wasting a potential production element of great significance to this country. More attention should be given to this matter, bearing in mind that much information which could be used for co-ordination purposes is already available, in terms of the census of production. It is a question of bringing the small firms into the comity of exporters. The Government are falling down badly in not realising our position in the export world and taking steps to consider more carefully, in the long term, our potential customers in the under-developed countries.

8.34 p.m.

Dame Patricia Hornsby-Smith: I am grateful to be able to follow the hon. Member for Lichfield and Tamworth (Mr. Snow) in some of the remarks that he has made with regard to Commonwealth trade. I agree with some of his points, especially the last. I, too, would like to see more collective encouragement given to the smaller exporter who cannot on his own project what might be a good seller, although I wish to pay tribute to the excellent work which I have seen done by our trade commissioners abroad.
I disagree with the hon. Member, however, in his disparagement of the amount of export trade that is being sustained and expanded within the Commonwealth. Many of our great Commonwealth partners still regard Anglo-Commonwealth trade in the light of the old Ottawa Agreement days of the 1930s. At that time our trade, overall, was complementary. They sent us food and raw materials and we sent manufactured goods in exchange. They are still following that basic principle and adopting the view that no matter how much

food and raw materials they produce we shall still be able to stomach—and that is an appropriate word in that connection—the same proportion and absorb their increased production. They tend to ignore the fact that time and time again we find ourselves losing the markets which we had with them, not through any inefficiency on our part but because of their expanding industrialisation—in which we rejoice—as a result of which they are now making themselves many of the goods which they used to buy from us.
The most significant of all comparative figures in respect of Australia is that, whereas in 1939 she had one person working in agriculture for every person working in industry, today she has eight people employed in industry for every one in agriculture. Together with the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) and my hon. Friend the Member for Rye (Mr. Godman Irvine), I had the privilege of going to Australasia last year. We were all enormously impressed by the tremendous development in Australia. In fairness to our exporters, however, we must recognise that this is a tug-of-war. We are asked by Commonwealth countries and our own people to export and at the same time we are pressed to invest and open up companies in those countries.
If anybody were to look at the export figures of four very distinguished companies in the Cray Valley in my constituency, he could make a powerful speech deploring the manner in which their exports to Australia and New Zealand have dropped. But if he probed further into the matter he would find that all four companies—Standard Telephones, Klingers, Morphy-Richards and Wiggins-Teape in Kent have opened plants in Australia.

Mr. Snow: The hon. Lady said earlier, in error, that I had disparaged Commonwealth trade. I did not. I quoted from the Plowden Committee, which drew attention to the attitude of some Commonwealth countries in this respect.

Dame Patricia Hornsby-Smith: I apologise to the hon. Member if I misrepresented him. What I hoped I said was that he disparaged the extent of our Commonwealth trade. We have this tug-of-war with the investment by


British companies in these territories by which, I will not say that we cut our throats, but we scratch our throats. These four companies which I have named are among the 500 companies which have set up subsidiaries in Australia. No longer do exports flow from the works in the Cray Valley to Australia Or to New Zealand because these four companies are manufacturing in Australia and not only for Australia.
I am not likely to forget a meeting which I had with a former constituent who three years ago went out to Klinger's new factory near Perth. I said, "I remember you proudly telling me at some celebration at your works in about 1955 that you were then exporting Sidcup to 91 countries. I suppose that now it is 90 countries". He told me, bluntly "Do not be stupid. Through opening the works here we have taken over all the Southern Hemisphere exports. We are doing all the trade with India as well as with Indonesia and Hon.g Kong, and some with China, and certainly with New Zealand and eight countries below the Equator in Africa ". I rejoice in the development in Australia. I am delighted to see it, but I think it grossly unfair that we should condemn some of the very many companies in this country which have supported the Commonwealth by opening up branches of great industries in those territories. Thereafter they cannot expect to export to the territories and, therefore, must turn their attention to increasing and expanding their exports to areas not necessarily in the Commonwealth.
I pay great tribute to the large body of exporters who year after year have re-adapted themselves to the needs of these Commonwealth countries. We must acknowledge that in many cases we now see manufactured goods being produced from the newly developing countries. There are now millions of yards of cloth from India some being sold in Australia. That is still Commonwealth trade. But India being nearer to Australia and with cheaper labour is able to sell more cheaply cottons which formerly Australia took from this country. It is not because of bad trading or lack of foresight on the part of our own exporters, but because of, and we should pay tribute to, the contribution made by companies which have

invested in the Commonwealth territories. I say frankly, I do not think that we get sufficient acknowledgment of the tremendous efforts and investments which have been made, not in one Commonwealth country but in 40 territories by various companies in Great Britain.
There are still many companies in this country which could make a greater export effort. I congratulate my right hon. Friend on the record returns of which we heard this week. That is a great tribute to companies which are prepared to send out people who can really talk to our colleagues abroad. That is much more useful than sending out brochures. When in Australia and New Zealand we found that the people there do not like looking at brochures. There were Japanese, Indonesian, American India Swedish delegations all selling as lard as they could and we must send out more people to negotiate contracts—people at a high level, at director and executive level.
There are still some firms in this country who adopt the attitude, "Why should we bother to export when we can sell everything we make in the High Street?" I hope that my hon. Friend wit exert pressure to persuade those firms which could export but will not do so that they would not be able to produce their goods for the home market were it not that other firms do export, and provide the wherewithal to supply the raw materials for their products. People who could export but will not art: living on the backs of those who go out to get the trade.
We are proud of our record export figures. It shows that we have firms in the export trade which are adaptable and capable of looking ahead to meet the challenge provided by those former customers who now make things which were previously supplied to them. They have gone out with more sophisticated goods which we in this country still have the know-how, ability and capacity to produce so that we are able to keep one jump head of those who have not our experience, such as in electronics and heavy plant and machinery. We have every reason to be proud of our contribution. The Budget is not dramatic or exciting, and there is no particular reason why it should be, but it is a tribute to the fact that our policies


have been right. When a Chancellor of the Exchequer can say that he is absorbing £1,700 million more expenditure for education, hospitals, roads and housing, for which the country has been asking, and at the same time can sustain the economy, by increasing taxation by only £103 million, we can say that it is a job well done.

8.46 p.m.

Mr. A. E. P. Duffy: I hope that the right hon. Lady the Member for Chislehurst (Dame Patricia Hornsby-Smith) will forgive me if I do not follow her arguments. Trade is of tremendous importance and I was much interested in her speech, but I shall confine my observations on the Budget to the relationship between the flow of demand and the flow of production.
May I go back to the speech of the hon. Member for Bodmin (Sir Douglas Marshall), who thought that the cut in demand of £100 million made by the Chancellor was a wise cut. He thought that it would make for steady development. I am sorry that the hon. Member is no longer in the Chamber, because I was aching to ask him how he had managed to work this out and why he is so certain that the Chancellor's cut in demand is just right. When I recall all the advice which has been given to the Chancellor in recent weeks, I cannot think of one authority which worked out, with a reasonable argument to support it, that this was the amount of cut in demand which should be made.
The weightiest authority is the National Institute of Economic and Social Research which had no trepidation in diagnosing the trouble as requiring a 2 per cent. reduction in the forecast level of home output in mid-1965. It said that:
given the uncertainty of the forecasts, the need for a smooth transition and the effects on confidence and other indirect consequences of any big change in taxation or expenditure, this would be an excessive adjustment for the Government to make at this stage.
Therefore, the National Institute was prepared to step down from the 2 per cent. recommendation. It said,
We suggest a cut of about 1 per cent. in the rate at which real expenditure, public and private, is rising. This would require an increase in present taxation of about £200 million or a reduction in Government expenditure of rather less than this.

As we all know, the Chancellor has opted for just half of this amount. I wonder whether he was fully mindful of the experience of his predecessors in trying to relate demand to production in the post-war years and especially in more recent years, because it was the experience of every one of them that in trying both to stimulate and to restrict demand it was necessary to over-shoot. Yet the Chancellor has opted again for what the hon. Member for Bodmin described as a moderate cut—and this description was repeated by my right hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. Woodburn).
Will the Chancellor succeed? Let us assume at this stage that he will. I think that his cut in demand, given that it is only half what the National Institute regarded as a bare minimum, can be regarded as a dampening down. Will the dampening down of our economy suffice? If it suffices, will it take us out of the stop-go cycle? If it does not, shall we not still find ourselves as an economy in the all too familiar pattern which has given rise to successive post-war economic crises, which in turn have led us to lose our international place to countries which are increasing in number and whose identities are all too well known to bear repetition? This pattern, moreover, has seen us inexorably being responsible for a shrinking percentage of world trade.
I think, given this, that we are entitled to query the Chancellor's premise. We are entitled to ask him: is the present crisis, or his forecast of the movement our economy in the near future, one of over-expansion? I think that it will be agreed that I am staying with the Chancellor for as long as I can and I am going as far with him in my argument as I possibly can. I am following his assumptions until I think that they are no longer tenable.
If the present crisis is one of overexpansion, it certainly is not due to wage costs, because since 1961 wage costs in this country have declined by over 10 per cent. relative to France and Germany and by over 20 per cent. relative to Italy. Is over-expansion, in the view of the Chancellor, due to money in the pockets of old age pensioners, because the right hon. Gentleman clearly intends to use them as one of his regulators?


I do not want to make much of this, because the thoughts and the experience of many old people as the result of the Budget must be all too vivid in the minds of my hearers. Further, if I were to try, even briefly, to describe what the Budget would mean to many old age pensioners, it would be painful.
Neither is over-expansion due to congestion in all parts of the economy. It may he true in the Midlands and the South-East, but it is certainly not true in the North-East, in Scotland and in Northern Ireland. It is clear that a lifting of the foot from the accelerator in the South-East and the Midlands is tantamount to standing on the brake still in the North-East and in Scotland.
I do not think that I can push the argument any further. It will be seen that global control of demand is not appropriate to our difficulties and to their relief. It is neither fair nor suitable for regulating the flow of income to production, which task I set myself. What it is clearly needed are selective stimuli of our economy. What is needed is an increase in productivity. If we cannot get an increase in productivity, if we cannot alter units of labour costs in the Midlands and the South-East any longer, given the present phase of the trade cycle, surely there is hope in other parts of our economy where there are still under-employed resources. This calls for regional policies.
I leave the assumption of the Chancellor there. It is reasonable to argue that measures different from those he has used are called for because the situation, and therefore the problem, is different. A year ago the Chancellor was rightly concerned with the recovery of the full employment of existing or underemployed productive capacity. However, the right hon. Gentleman began his Budget speech yesterday by saying:
I described the theme of last year's Budget as expansion without inflation, expansion at a rate that can be sustained, and I said that its purpose was to do the Government's part in achieving the 4 per cent. growth rate that we had already accepted as our target in the National Economic Development Council. This year I have the same theme and the same purpose."—[OFFCIAL REPORT, 14th April, 1964; Vol. 693, c. 239.]
I take issue with the right hon. Gentleman there because I do not regard his problem this year as similar to that of last year. As I have more than hinted, his

problem this year is not the recovery of the full employment of existing or underemployed productive capacity but how to accelerate the expansion of existing capacity.

Mr. Green: The Chancellor agrees with the lion. Gentleman. His problem this year is not the same as last year and this is really the theme of his Budget speech. It is in order to get the country c n to a sustainable rate of growth as opposed to the first starting impulse that was given last year.

Mr. Duffy: That may be so, but I thought, as I gathered from the speech of the Secretary of State for Industry and Trade this afternoon, that the Chancellor was concerned with getting a break-through, but in an entirely different situation. I thought that he was trying to get our economy on to a smoother ascending curve, rather like what happens to an aircraft after it has taken a lot of buffeting and has broken through the sound barrier. This reminds me of the difficulties which confronted the aircraft manufacturers when aircraft were being buffeted against the sound barrier. Finally flying became more smooth as the break-through came. The economy is rather in that position. We need to break through a sort of sound barrier in the economy and I do not believe their the Chancellor has taken measures which will achieve that breakthrough. If he has, or if he considers that he has, that fact has not been made clear to me.
We must be concerned not merely with the underlying growth. We must be concerned with the 4 per cent. growth target of N.E.D.C. and I am not at all optimistic that that target can be reached given present arrangements. That target must be reached and sustained if we are to meet our capital needs, which will continue to grow. Demand for capital will increase in the new industrial revolution, with the coming of automation and computers. Demands for capital will also increase for the supply of new services and entertainments to meet the leisure opportunities which will stem from automation.
I need not elaborate the demand for capital for roads, universities, schools, hospitals and so on. Expenditure on all these things cannot be estimated, but the rate of growth over the last decade


can be projected to a necessarily steepening curve to give a hint of the magnitude of the expenditure involved. Capital formation rose to £4,600 million in 1962. This rate of progress must and will be in the region of £10,000 million by 1972. In 1962 the capital formation was equivalent to one-fifth of the gross national product. Already, the Government, contemplating the financial repercussions of Beeching and Buchanan, Newsom and Robbins, have forecast in last December's White Paper an average annual increase in public expenditure—from 1963 to 1968—of just over 4 per cent. or nearly £2,000 million in absolute terms over the whole five-year period both on current and capital account.
Can we meet this target in public expenditure without the necessary gross capital formation, and can we get that gross capital formation without the necessary underlying growth of the economy? I think that the N.E.D.C. is doubtful. Its Reports make very interesting reading but they cannot be taken at their face value. They remind me of the reports of the H.M.I.s, who never really say outright what they are thinking; one has to read between the lines and weigh words. One can understand why they write in such guarded language, and if that is true of H.M.I.s it must be true of the N.E.D.C. With the best will in the world, Sir Robert Shone is human and must be concerned with Government and with the knowledge that he is writing for an audience likely to be more critical of his recommendations than, perhaps, another party would be.
In paragraph 21 of the N.E.D.C. Report The Growth of the Economy we find:
While industry believes that there will be sufficient capacity to achieve a 4 per cent. growth, some industries may have underestimated difficulties in obtaining skilled labour which it may be possible to overcome only by the re-equipment of their factories with new plant giving higher output in relation to the labour required. Investment in private manufacturing industry, after a peak in 1961, has been relatively low for some time and will have to be substantially higher in future. The Council believes that industry should be made more fully aware of the significance of the system of capital allowances.
The N.E.D.C. does not seem to be quite sure that the necessary levels of

investment will be forthcoming. When I recall the recent rise in Bank Rate, I cannot believe that that will help investment. I know that it was thought necessary to increase the Bank Rate because of the rise in imports, and bank advances of something like £500 million quite clearly show that a lot of these imports are being financed by credit. I do not want to speak further about imports now—much has already been said about them in this debate, although I sometimes wonder—when I look at their changed character, and when I note that the largest increases in imports have not been in raw materials but in manufactures, which increased 40 per cent., and in chemicals, which increased 50 per cent.; and that the importation of machinery and transport equipment contains such items as central heating equipment, refrigerators, sewing machines, T.V. and radio sets, electric shavers and so on which can contribute little to our output and efficiency—that we do not look once again at the changed character of our imports, despite all that has been said this afternoon and despite the exchanges between the Secretary of State and my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan).
Before I leave the subject of the Bank Rate, which is now at the 5 per cent. level, I cannot resist reminding hon. Members that the last clear-cut instance I can find where an Administration retained office at a General Election when the Bank Rate was at 5 per cent. or above was in April, 1857, when the Palmerston Government were returned to power with an increased majority. The previous Parliament had been dissolved on 21st March, when the Bank Rate was 6 per cent. The rate was raised to 6½ per cent. in April. A marginal case did occur at the General Election held in December, 1910, when Asquith's Liberal Government retained power. When Parliament was dissolved on 28th November, 1910, the Bank Rate was 5 per cent., but it was reduced to 4½ per cent. on 1st December, two days before the first day of polling. The Government established a constitutional record in 1959 by winning three elections in a row. I doubt whether it will set up another record by breaking this 107 years sequence.
Clearly, if we are to achieve the necessary level of investment which will give


the gross capital formation required and expansion of our economy to support the vast expenditures which are pending, there is need for savings. Again I consult the N.E.D.C. Report, and I find a note of doubt in the paragraph on savings, paragraph 24:
On the basis of the growth programme consumers' expenditure can continue to increase more rapidly than in the past, but it will need to take a smaller share of the growing national product in the next few years to leave sufficient savings to provide for the rapid increase in investment. Private savings should increase substantially but there may be a need for measures to stimulate them or to increase government savings.
Again there is this note of doubt. I welcome the announcement yesterday of the new Development Bonds, but I am sorry that the Chancellor did not consider a suggestion put forward by Alan Day in the Westminster Bank Review in February this year. He thought the Chancellor might consider issuing securities in the form of national equities. The Government might have considered issuing securities in the form of national equities, whose dividends varied with the economic success and prosperity of the country. Many variations of this idea could be developed, but probably the most useful way of thinking of the idea is to consider a Government security which would contractually commit the Government to paying an annual dividend whose amount would vary in proportion to changes in the gross national product of the country. Thus a national equity issued at £100 in this year might pay an annual dividend determined by the gross national product. The attraction of such a national equity would be particularly great for the small investor. Such national equities could be marketed on the lines of National Savings by deliberately encouraging small investors to buy them in small amounts by imposing a maximum limit to the holdings of any individual.
If I am dubious that we shall be able to provide the underlying growth in our economy that in turn will enable us to do all the things to which the Government have committed us as well as to meet the N.E.D.C. target, what do I think is called for? How can we make this breakthrough to which I have referred? Again I must make resort to the last Report of the N.E.D.C. in paragraph 44. I think this a very important paragraph, not so much because it tells us what we all know about the need for a rate

of growth during the next few years, but because of the important words and pregnant phrases such as
the extent to which new conditions can be created
and the particular challenge of how they
will require constructive effort in many directions and the widespread acceptance of new responsibilities.
It will not come as a surprise to the Committer that we shall have many obstacles to growth in education, training incentives The industrial structure must all be clanged in response to general change. We have already made significant moves in the last year in the direction of education and training. I am sorry that the Chancellor missed this opportunity of doing something by way of incentives to imaginative tax reform. I could not disagree more with the hon. Member for Bodmin, whom I now see in his place, who thought that the Budget was sensible but not exciting. He asked, do we need an exciting Budget? Of course we need an exciting Budget. We have never had a greater need for an exciting Budget than this year. Given the need I have already stated, we must break through.
In conclusion, I confine myself to one particular set of recommendations that bear on the structure of industry. We must, of course, adjust our structure of industry. We must stimulate the nationalisation of individual industries. There is an overwhelming need to stimulate the application of research to industry. There is a need to stimulate innovation and promote dynamism.
Do not all these exciting possibilities call for an exciting Budget? They can be achieved only through purposive rather than indicative planning. Only in this way can we secure faster growth and a better increase in incomes. Only in this we can we secure a stable and expanding economy, and, incidentally, provide the indispensable conditions for widespread acceptance of a national incomes policy.
I regard all these needs as part of the objective situation. The situation should compel any Government to adopt the kind of approach which I have recommended. This Government are hesitating now, as the y have hesitated before. They are hesitating now because they are not quite clear what they are about. This


is why the right hon. Member for Wolverhampton, South-West (Mr. Powell) may yet do a great service to his party, by obliging it to rethink its position. There have been all too many examples in recent years of dithering, vacillation and hesitation on the part of the Government when their policies have run into trouble, because they have not been clearly thought out, or when the going has been rough and caused them to dither or retreat.
This is why our society in recent years, under the present Government, has been less of an affluent society than an equivocal society. We have had a Government who have equivocated and who have not been able to make up their mind. I am entirely at one with the right hon. Member for Wolverhampton, South-West when he says that the battleground for the next election may be this kind of question, about the way in which our country's economy should be conducted, whether there should be planning of the sort which I have recommended as opposed to allowing our economy to be governed by market forces.
I hope that that will be the battleground. If it is, in face of the facts of the present developing situation as I have stated them, I am sure that we shall be the victors, not the present Government.

9.12 p.m.

Mr. Brian O'Malley: I am in complete agreement with my hon. Friend the Member for Colne Valley (Mr. Duffy) when he says that he cannot join in the congratulations to the Chancellor on his Budget which have been paid by a number of hon. Members opposite. It seems to me that the verdict of history on this Budget will be that, in the stormy twilight of a moribund Administration, the present Chancellor avoided his real long-term responsibilities to the nation.
One central problem has caused an enormous difficulty in our economy throughout the 1950s. Whenever we have had an expanding economy, whenever the wheels of industry have begun to turn and we have had full employment, within a short time we have had inflation and a balance of payments crisis on our hands. As long ago as the time

when the present Foreign Secretary was Chancellor of the Exchequer we were told—these were the right hon. Gentleman's words at the time—that we could no longer allow this country's economy to go at full tilt for long periods together.
In dealing with the central problem of growth, which has been so adequately described by my hon. Friend the Member for Colne Valley, this is the obstacle to be overcome, the obstacle which the present Administration have failed to overcome. We have seen a number of Measures, all equally ineffective, taken by the Government to deal with the shortened trade cycle. Indeed, many hon. Members opposite often give the impression that they believe that this shortened trade cycle has almost a ring of inevitability about it, just as in the last century and the early decades of this it was thought that the decennial trade cycle, coming every seven to ten years, was almost a rule of nature about which one could do nothing.
This Administration, in 12 or 13 years, has tried a number of things. There was the interesting experiment, which can best be described briefly as "Boyle's Law", to keep the cost of living down by forcing prices up. This was the dictum put forward by the present Minister of State for Education and Science. The Tory Administration, in I think 1955–56, abolished the subsidy on bread and lowered the subsidy on milk. In 1956, Purchase Tax on household goods was increased. The full burden of restraint, just as in later years, was laid at the door and made the express responsibility of the wage and salary earner.
A few years after that we had the plateau theory, then the theory of high Bank Rate. Now in 1964 we are in a boom period fostered to coincide with a General Election, but the Government are no nearer to solving what any of us would admit is the tremendously difficult problem of dealing with this shortened trade cycle of stop-go which we have experienced for a number of years.
I should have thought that one of the most important things which the Chancellor should have proposed in his Budget was to put into operation measures to control and deal with this problem of the cycle of stop-go, the cycle


of recession and slight growth, which we have with regular monotony every 12 or 18 months or two years. Hon. Members on both sides would seem, on the surface, to agree that one way of solving this problem of the shortened trade cycle is through a national incomes policy.
I agree with the hon. Member for Bodmin (Sir Douglas Marshall) that there are important outside influences beyond our control which from time to time put strains and pressures on our internal economy because we are a trading nation which is largely dependent on world trade for making our living. The long-term task of any British Administration is to see what can be done to increase international financial liquidity so that we can sell more of our goods overseas, particularly to the under-developed nations, which, if they are to get out of the take-off period and raise the level of their economics, will need all the benefits of credit and increased liquidity. But this does not exonerate the Government from at least attempting to play their part in dealing with the shortened trade cycle which we have been experiencing.
A few weeks or, perhaps, months ago, the Federation of British Industries issued a statement about the problem of an incomes policy and prices. It did precisely what the Chancellor of the Exchequer did yesterday. The right hon. Gentleman agreed in principle with a national incomes policy. He agreed with many other things in principle. He examined all kinds of situations and then said why he could not do anything about them. The right hon. Gentleman says that we must have discipline and a national incomes policy. Part of the Government's difficulty in attempting to implement an incomes policy is the fact that the trade unions can have little trust in a Government who have dealt with legitimate claims over a number of years in the manner of this Government.
What makes the situation particularly difficult is that one cannot go to one's trade union branches—and certainly as a trade unionist, I have no intention of going to my union branches—and say that we will operate only a wages policy. We must genuinely operate an incomes policy dealing not only with wages and salaries, but, at the same time, with profits, dividends and capital gains. The

fact that the Government have failed even to begin to plan an incomes policy can be soon in the fact that no suggestions have come from the benches opposite about how to implement a national incomes policy. At the Labour Party Conference last year, the unions said that that would agree to a planned growth of wages. How can one expect them to do this unless there are suggestions for a form of incomes policy for other kinds of income? As yet, I have heard nothing from the Chancellor of the Exchequer or from hon. Members opposite about how, by tax or other means, w e are to implement an incomes policy which is really an incomes and not a wages policy.
I should like to refer particularly to the steel industry, its growth and some of its problems under the system of what I call not private enterprise but private ownership, for which the Government, the Minister of Power and the Iron and Steel Board have some responsibility. Yesterday, the Chancellor said that the steel industry was booming. I am pleased that in my constituency the short-time working that we experienced a year ago has disappeared. The right hon. Gentleman said that production was 30 per cent. higher than a year ago. It should, however, be pointed out that a year ago steel production was running at the 1959 level.
It is not enough for hon. Members opposite to argue, as they have done, that the difficulties of our steel industry arise from a surplus of capacity throughout the world. This is, obviously, a factor which has influenced the steel industry the world over. We have a situation in our steel industry in which the men who work in it have lost millions of pounds in wages precisely because of the failure of the Government to deal with the shortened trade cycle which we have experienced in the 1950s and in the 1960s.
Although the hon. Member for Somerset, North (Sir E. Leather) was opposed for league tables, I must use some of them. When the hon. Member said that such tables were dangerous it should have been pointed out to him that when looking at some of the production figures and comparing the rate of growth in our steel and other industries with industries abroad, from the


viewpoint of the Government and their chances of being returned to power at the polls in October or whenever the General Election comes, they are very dangerous.
It is worth examining the growth of crude steel production and comparing it with the growth of production in other countries of Western Europe and beyond. Because I would not want to lay myself open to the charge that I was choosing a particular year or combination of years to quote tables and statistics, I consider it useful to look at a period of nine or ten years in which we have seen several times over the working of the shortened trade cycle from which we have suffered in recent years.
The lesson of the information from such tables is clear. When production of crude steel everywhere has been rising, ours has been rising at a slower rate than that of countries overseas. Between 1955 and 1957, for example, it was increasing in the E.E.C. countries by about 13·6 per cent. In Japan—but I would not make a lot of this—output was up by 35 per cent. In this country it was up by 9 percent.
Then came the period of recession in the world steel industry. Production in 1958 dropped by 11 percent. in the United Kingdom. It also fell in the E.E.C. countries but by nothing like as much—only by 5 per cent.
The pick-up came in 1959–60 a situation comparable with that of 1963–64. The British steel industry increased its production by 20 per cent., the West German industry by 29 per cent. and the Japanese industry by 80 per cent. By 1962 our steel industry was back to the level reached in 1959. There were general surpluses of steel capacity in the world and difficulties in the E.E.C. countries as well as elsewhere. Nevertheless, the rate of production of steel in the E.E.C. countries in 1962 was 15 per cent. up on 1959. A similar kind of situation prevailed in 1963.
This example is a serious indictment of the Government's economic policy. The growth rate of industry in this country—of which the figures I have quoted are an illustration—has been much lower than in most other European countries.
Then there is the problem of raw materials. We are large-scale importers of raw materials. Sometimes the amount of such imports constitutes a serious danger to our balance of payments. In the 1950s, the working of home ores was the subject of prolonged wrangling between the Iron and Steel Board and the iron ore mining concerns. I think that it is now generally accepted by hon. Members that more home ore should be used by the steel industry.
We shall import increasing tonnages of foreign iron ore rich in iron content but, nevertheless, although this is an industry over which the Government have supervisory powers under the 1953 Act—I do not blame the Iron and Steel Board, for it has not the teeth that it should have—they have not been able to persuade the iron ore mining concerns to put the necessary capital investment into the development of underground mining.
The Government have great responsibility for the present cost of importation of foreign ores. The British Iron and Steel Corporation (Ore) Ltd., either directly or indirectly, has spent in the last 10 years about £60 million on bulk ore carriers but these have been limited to ships of 8–9,000 tons and 15–16,000 tons. Yet, at the same time, the Japanese have been building bulk carriers from 40,000 to 75,000 tons. The smallness of our vessels has added several shillings a ton to the cost of foreign iron ore.
At the tail end of 13 years of the Conservative Administration, we now have the National Ports Council, which is beginning to deal with this problem. But the fact remains that perhaps £60 million has been spent on ships that were out of date before they were even completed. This is the result of the inadequacy of the Government's investment programme and their failure to direct investment into essential public services. If the right policies had been pursued, so much could have been done to help our balance of payments situation.
The Financial Times only yesterday mentioned that growing imports of foreign steel were causing concern among some members of the National Economic Development Council. It is notable that steel imports have been


climbing steadily since last August, rising to more than 55,000 tons in February of this year. The Financial Times went on to say:
It has publicly stated that the situation is significant for the balance of payments position because additional imports of the order of import ingot tons might cause a deterioration of some £15m.–£20m. per annum'.
Council members will also try to discover what possibilities exist for producing in Britain and on a competitive basis, goods of the type now coming from overseas.
While fully appreciating some of the price cutting which has been going on in steel in world markets, I would have thought that one of the reasons why we were suffering from this kind of difficulty with the imports of finished steel products was that the steel masters, through their conferences, have been using and putting into operation the maximum prices which have been fixed by the iron and steel industry and that in this industry maximum prices have always been minimum prices. This is part of the difficulty.
On 2nd September, last year, the Financial Times quoted the estimate of one shipyard which said that by using British steel for a 50,000 ton vessel, £140,000 was added to the total cost of the estimate. I am not being dogmatic about this, but when the Government clearly have a supervisory responsibility for the industry and for pricing in that industry, when that kind of situation starts to raise its head—and it has been going on for some time—and when shipyards are making that kind of complaint, at least more than a cursory examination should be made of steel prices. Now that the steel industry is to benefit to the tune of about £2 million in the reduction of the cost at which the nationalised coal industry will sell it coking coal, I hope that that production will be reflected to some degree in the prices at which steel is sold in this country.
At a time when we are particularly concerned about imports, it is surprising that the Government seem to have made no examination of the restrictive agreements which the steel owners have made. I understand that there is clear evidence that cold rolled sheets and tin-plate exports are being held up because of restrictive agreements of this kind. I would have thought that any Government, seeing the fall in the exports of

steel products to the Commonwealth which this country has experienced while other countries have been increasing their exports, would have looked to see what was wrong with the industry. Between 1961 and 1962, while E.E.C. countries expanded their steel exports to the British Commonwealth by 62 per cent., United kingdom steel exports to the Commonwealth fell by 28 per cent. This kind of situation should have been investigated a long time ago.
I know the importance of the arguments for looking at regional planning and making regional proposals to avoid distortion and the situation when we are putting on the brakes when we still have endemic and chronic unemployment in some areas. But what is most important to these regions and for the long-term prosperity and growth of the country's economy and the single most important problem which the Chancellor should have faced in the Budget is that of beginning to implement and beginning to create the atmosphere and conditions for a national incomes policy. This the Chancellor has failed to do and it is this failure for which he will be remembered.

9.35 p.m

Sir Henry d'Avigdor-Goldsmid: It is a privilege to be called in this debate, even if it is only to share in the feelings described by the noble Earl, Lord Longford, as the loneliness of the long distance talker.
We have had a good debate today, and I war particularly impressed by the opening exchanges. I felt that the hon. Member for Cardiff, South-East (Mr. Callaghar), who is, of course, on his annual visit to the B.B.C. as the Quest star in "juke Box Jury ", did not really come out of the exchanges as well as he had expected to do. I wondered whether, perhaps like another famous battler. Floyd Paterson, he had not been led away by Press comment in advance to feel that he had a walk-over in front of him, because, as we know, it was not long ago that hon. Gentlemen opposite said shat the Conservatives' chances of winning the next election were about as good a; those of Cassius Clay winning the world title.
I am certain that today's exchanges with my might hon. Friend the President


of the Board of Trade and Secretary of State for so many other matters must have left the hon. Gentleman rather relieved to think that in adjourning to the B.B.C. he would have a more congenial audience, probably equally divided between the Mods and the Rockers.
I thought that today's debate was rather given to the Mods. I thought that the Rockers did not really take much part in it, but no doubt when the weekend speeches are made the Rockers will be able to express their views about the document which the Parliamentary party seems to have accepted with a great deal of equanimity.
I should like to comment a little on the speech of the right hon. Gentleman the Leader of the Liberal Party who, with his usual courtesy, is present now. His great charm of manner sometimes conceals a certain paucity of thought. I felt that on this occasion he did not really give a great lead to the faithful, who no doubt were hanging on his words. In that connection, I congratulate him on a particularly satisfactory turn-out by the Members of his party. I think that 100 per cent. of them were present at one time. That is a fine record, which any other party would envy.
Of the right hon. Gentleman's suggestions for improvements, the only concrete one that I grasped was the taxing of the one-armed bandit. No doubt clubs play a lesser part in the work of the Liberal Party than they do in the work of the Conservative and Labour Parties, but I think that even in some Liberal clubs people would be very sad to find that not only were their beer and cigarettes taxed, but their one-armed bandits were taxed, too.
I think that his suggestion about immediate tax reform seemed to overlook the point made so well by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) that all these reforms of taxation involve a loss to the Revenue, and that this was particularly a year when revenue was needed.
The right hon. Gentleman taxed my right hon. Friend with having a problem for every solution, but I suggest that the solutions he propounded had no

particular reference to the problems at all, and were about as relevant as a suggestion I remember being made in an earlier Liberal paper that we should save a great deal of money by turning our Air Force over to N.A.T.O.
The most interesting speech I heard was that of the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins). He does not come here often, and when he does he has something valuable to say. I also feel that he drinks from the Pierian Spring and that the true gospel emerges from his lips—although it was rather muted in coming from the hon. Member for Cardiff, South-East. He mentioned what he called the small capital tax. I suppose that that is the old wealth tax of last year. The hon. and learned Member for Kettering (Mr. Mitchison) suggested that I was out of order in mentioning it last year. All I say now is that perhaps I gave it a bad name—but it was they who hanged the dog.
I noticed that in the hon. Member's party piece he made reference to the small capital tax and to a dividend equalisation tax. Both proposals would have the effect of discouraging investment, and we surely want to encourage investment more than anything else in this age. I need not labour the point. This has been a good year for the economy. We have congratulated ourselves on our highest-ever exports this month, and the fact that this is a good year is reflected in the Budget figures. We have a surplus above the line instead of the deficit for which we budgeted a year ago, and our below the line deficit was lower than we expected.
We are, therefore, entitled to ask why we should increase taxes at the moment. It is not helpful to talk in analogies about the economy overheating. The fact is that unless we tax ourselves more we shall not cover, out of revenue, the charges which the Revenue normally has to carry. Every now and again we can indulge in deficit financing—in other words, run an overdraft—but we cannot, as a responsible country, make a habit of it. I would have thought that deficit financing was the Chancellor's niblick. It gets him out of a bunker every now and again. But it should not be his sole club. If it is, he will not make much progress.
It is clear that this is not a year for deficit financing. We must pay more taxes, because we are planning not only to spend more in the coming year, but to do so increasingly in the years to come. On Monday last there was an interesting article in the Daily Telegraph by C. T. Saunders, the Director of the National Institute of Economic and Social Research. By an ingenious combination of figures, which I am sure most hon. Members have seen, he was able to project the total expenditure on public services for this year and also for 1967. I have no reason to suppose that his figures are incorrect. He said that if we include the expenditure of local authorities, and transfer payments, such as National Insurance benefits, Government payments amounted to 40 per cent. of the gross national product in 1952; that percentage fell to 35 per cent. in 1959, and then rose slightly to about 37½ per cent. this year. On the basis of the public expenditure forecast in Could. 2235 in 1967 public expenditure will represent 39 per cent. or 40 per cent. of the gross national product. That, of course, is allowing for this growth, of 4 per cent, per annum. I wonder what are the implications for us all. We should be very optimistic to think that a 4 per cent. growth is a figure on which one could live. We could have a higher growth one year or a lower or another growth in another year. But a 4 per cent. growth has been reached for these last two years. It was surpassed last year and reached this year. Mr. Saunders sums it up by saying:
What is certain is that if we fall short by a wide margin of the 4 per cent. growth objective, then anything on the scale of present projections for public spending must mean a quite marked increase in tax rates—at least 10 per cent.
I think my right hon. Friend found this year in the increased tobacco duty that the law of diminishing returns might be operating. In other words, there must be a number of taxes not capable of very considerable expansion. This raises some problems for us which are bound to be serious. Generally speaking, like back benchers the taxpayer has been chastised with whips and is now in for a dose of scorpions. Like the Red Queen in Alice in Wonderland we can say that it takes all the running that we can do to keep in the same

Place This is a sobering reflection for us in the middle of this week because, as I say, we have had a good year.
One must now turn to see what our defences are like. Yesterday my right hon. Friend detailed the massive reserves on which we could call if we met balance of payments troubles. He mentioned our portfolio of dollar securities amounting to 1,000 million dollars and the facilities for borrowing from the central banks of 500 million dollars and the International Monetary Fund standby of 21 billion dollars If we add that up it comes to 4,000 million dollars, and with our gold and dollar reserves we reach the very big figure of £2,500 million. But it is no use linking the facts with that. In December 1963, our external liabilities were £3,689 million according to the Monthly Digest of Statistics. In other words, out. reserves are negative. In this position I think that we are alone of any important trading nation. We ought not to blink these figures. They are published and everyone concerned in these matters knows about them. They give us course for thought. I remember the right hon. Gentleman, formerly Minister of Education and now Minister of State for Education and Science, saying in a finance debate some years ago that all these reserves very often turn out to be fairy gild. They are not there when we want them. All this enjoins on us the necessity to conduct our affairs seriously, soberly and sensibly.
If I ask myself why do people send their money here, my answer would be, because they can use it profitably when it is here and because they are confident that they can withdraw it at will. If the confidence is lacking, changing interest rates does not remedy the position. When there was a run on sterling in 1961 we put up the Bank Rate to 7 per cent. and money returned. It was not because the rate of interest was so attractive but because of the willingness of the Government, and particularly of my right hon. and learned Friend the Leader of the House, to take unpopular measures at the time. They were bitterly criticised, as I remember very well, but they convinced outsiders that we were determined to keep our house in order. In this, lipservice alone is not sufficient. If we will the end, He must will the means.
Years a job, when I first studied these matters, there was a financial crisis in


Belgium, and the Belgian Minister appeared waving a bag saying, "Le franc est sauvé". The next day the Belgian franc was devalued. Lip-service is not sufficient, and the integrity of sterling depends on the interaction of a number of forces. First, on the Government's side, there is need of the moral courage to take unpopular action if it is necessary. The British public, on their side, must have confidence in the Government and in their own domestic banking institutions. The banks, valuing confidence as their greatest asset, for their part must co-operate with the Government and must conduct their affairs as trustees of the public. These are the basic elements in the integrity of sterling, and it is no good thinking that we can achieve it by concentrating entirely on Government action. There must be the full co-operation of the banking system if confidence in sterling, without which we cannot exist, is to be maintained.
Sterling is buttressed by no substantial resilience. I will compare its position with the Etruscan arch in the ancient walled town of Perugia. This arch has supported all outside pressures for many hundreds of years, but even a coster's barrow jarring it from inside might bring catastrophe. Some years ago a former Member of the House of Commons, Sir Harold Nicolson, wrote words which I should like to quote because they have a certain application to this analogy:
The monoliths of which it is composed are joined by no cement. Impressive in their apparent solidarity these granite masses lean against each other, thrust resisting hidden thrust. Yet a swarm of summer bees upon the architrave, a sound of April water through some hidden crevice will cause a millimetre of displacement, will set these monoliths stirring against each other, unheard, unseen. One night a handful of dust will patter from the vaulting: the bats will squeak and wheel in sudden panic: nor can the fragile fingers of mere men stay the rush and tumble of destruction.
Those who in this House are entrusted with the responsibility for these great affairs should remember that analogy.
The British people have over the centuries been willing to undertake great tasks and have usually achieved them. The task which we have set ourselves now, summed up by my right hon. Friend as to achieve expansion without inflation, is in some ways no smaller than any we have ever faced before. Nor is it a mean or selfish one. If we want expansion, it is in order to play our part with our allies in the defence of the free world and to extend its frontiers not by conquest but by persuasion. We want to aid the emergent nations. We want to build up the lives of our people, to make sure that they are properly housed and if, through illness or through other misfortune, they fall upon hard times, to make sure that they are properly cared for. We want to go forward with great educational programmes which will do so much to enrich the lives of generations yet unborn.
On the other hand, we seek to avoid inflation because we know how disastrous are its effects on the old and the retired and all others who are least able to help themselves. We know what a mockery a painful rise in the cost of living brings to the great range of our social services. We know, finally, how dishon.est it is for a Government to seek to escape their obligations by debauching the currency it is their duty to protect.
It is because I hold these principles as the dearest in our public life, as I am sure we all do, that I welcome my right hon. Friend's Budget as an earnest of our Government's determination to play their full part in these high objectives and I thank him for the lead he has given to all of us in meeting our responsibilities.

Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again—[Mr. Hughes-Young]—put and agreed to.

Committee report Progress to sit again Tomorrow.

Orders of the Day — NATIONAL HEALTH SERVICE (DISPOSABLE SYRINGES)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hughes-Young.]

9.56 p m

Dr. J. Dickson Mabon: I do not see the Minister present, but I am sure that he will join us very shortly. At least I hope so, because I am very anxious to get a reply to the subject I raise tonight, namely the question of disposable sterile syringes in the general medical services. The extraordinary thing about this Adjournment debate is that, having raised this subject, I find to my surprise that the half-way house which the Government claim to have reached on the question of disposable sterile syringes in itself has not been realised. This is, indeed, one of the points which I did not think I would have to raise tonight but to which I am afraid I shall have to direct attention.
First, may I deploy the general case for these syringes. For a long time—in fact, since 1945—the Medical Research Council has been concerned about the possibility that, with the increasing use of syringes, not only for pathological specimens but also in treatment, the danger of syringe-transmitted infections might begin to increase. The Council published a report in 1945. In 1962 it published another report making recommendations which it hoped the Minister of Health and the Secretary of State for Scotland would act upon. It did this to a background of the incidence of infectious hepatitis, of which there is no fully accurate knowledge. The Council can take it only from sample reports here and there.
Infectious hepatitis is not a notifiable disease. This is one of the basic reasons why the figures are not available. However, death duties accredited to infectious hepatitis, although they cannot by any means be all attributed to syringetransmitted infections, are nevertheless interesting, because they measure the size of the problem, to some extent. In Scotland, for which I have the most recent figures, they range from 1951 to 1961 a t the following figures: 23, 21, 19, 24, 19, 24, 21, 26, 17, 35, 26. I concede that that does not show any trend up-

wards, and it does not reveal the morbidity from infectious hepatitis.
Then one has to take into account post-immunisation jaundice, from which three deaths were recorded in 1961, not under this heading, and the 25 deaths due to acute yellow atrophy of the liver, again not under this heading.
One wonders why these things occur. I noticesd from one of the reports of the Medical Officer of Health for Edinburgh—I think it was the 1961 Report—that he had an incidence of 155 cases amongst schoolchildren in one year. There were no deaths, thank heavens. Nevertheless, it is rather a high incidence best use in part at least of the use of improperly treated syringes.
I need not, I hope, deploy the arguments which the Medical Research Council in its Memorandum No. 41, published in 1962, put in favour of trying to achieve other methods of using sterile syringes than those presently available in general practice within the National Health Service. I draw the Minister's attention to pages 3 and 9, where this matter is adequately stated. I come to the question of the syringes themselves and—

It being Ten o'clock, the Motion for the Adjournment of the House lapsed without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. J. E. B. Hill.]

Dr. Mahon.: It has been suggested in some quarters, particularly in Scotland, that a complete service should be brought into being for the general medical service. In the Questions I have put to Ministers on this issue I have been given Answers which have not dealt with this matter but which have pointed out that the provision for such syringes in hospital practice is allowed.
I will deal first with the general medical service, since I had intended originally to raise only this matter. In Edinburgh, I am told, the practitioners, through tie local medical committee, have raised this issue on a number of occasions and I have with me the minutes of the Edinburgh local medical committee extending from November, 1962, until some time last year. They show how completely frustrated its


members are in their efforts to get satisfactory answers to their questions on this topic.
The Medical Officer of Health for Edinburgh has made an assessment of the cost of using these syringes in Edinburgh, not only by doctors in general practice but also by district nurses. He has come to the conclusion that the cost of providing disposable sterile syringes for a city of half a million people would be £2,000 a year. In terms of the incidence of the number of times disease is transmitted by syringes, this would be a fair economic bargain indeed, apart from the human gain.
I am told by Dr. Alistair Brown, who is an active protagonist in this cause, that no help has been received in this connection. I wish to refer in particular to the various matters which have been raised with the Scottish Office as long ago as November of last year and again by the Edinburgh medical committee recently, although no adequate reply has been received. When I first raised this matter with the Parliamentary Secretary in November and was told that this applied for hospitals but not for the general medical service, I received a number of letters from understandably irate doctors, including one from a group pathologist, saying that this service did not exist in certain parts of the country and that even in hospital practice these syringes were sometimes not available.
I wrote to the Scottish Office and the Ministry of Health and my last letter, of 20th March, was aimed at getting some up-to-date information. The Scottish Office has been more forthcoming and has admitted that its Health Department has written to five regional hospital boards on 27th February; but it is interesting to note that the letter speaks of the provision of syringes to general practitioners for the withdrawal of specimens for examination in hospital laboratories, as probably a part of the National Health Service Laboratory Service. The letter adds:
…this is in order to achieve a higher standard of sterility.
It should be remembered that syringes are either sterile or they are not. There is no question of standards of sterility. Those who have experience of general

medical practice know how difficult it is to get facilities properly to sterilise syringes. If one studies the Medical Research Council's Report it is obvious that the methods which doctors can employ in a busy practice are not adequate and that they should carry with them syringes which are in themselves sterile and which should not again be used in that round. They should have some help from the hospitals to maintain this service of using a sterile syringe which has been sterilised by a hospital or some other central depot, but which they should not be required to try to sterilise after having used it on another patient. This is the point that I seek to put to the Minister.
While the Ministry has tried to tell me that it has offered advice, I think it fair to mention the point made in the group pathologist's letter. He writes:
Sometime in November you asked the Minister about sterile syringes and Mr. Braine replied that 'hospitals had been authorised to provide sterile syringes free of charge to general practitioners'. I know this to be untrue so I wrote at once to our Regional Board for a copy of the circular which did the authorisation. There has been no circular and not even off-the-record guidance. I have been asked over and over again to explain which section of the N.H.S. empowers me to do as I have done for fifteen years, supply sterile syringes. The Ministry has tried to draft a circular on the subject…but can never make up its mind whether I am correct in making no charge or whether Clauses 16 to 18 of the 1946 Act would justify making a charge.
The position in Scotland has very well been drawn to attention by a letter in the British Medical Journal of 14th March, 1964, by Dr. Dowie, of Hamilton, Lanarkshire, which concludes:
The Minister says that this service"—
the supply of disposable syringes for pathological specimens:
exists; let him make sure it does in fact exist—now.
Dr. Dowie explains in a long letter that this is not the case in his area. He says that he has written a number of times to the Scottish Department of Health and also to the regional hospital board concerned without getting any satisfactory explanation of the facilities.
I hope that I have done a little to draw the Minister's attention to this very difficult problem, and I should like to ask him the following questions. First,


can he state quite authoritatively that the service for the supply of sterile syringes for use in getting pathological specimens for hospital laboratories will be extended as speedily as possible, and that it will not be hindered by including the cost within the present budgets of the boards? Otherwise, we must all admit that there will be a varied pattern of behaviour by different boards, depending on how hard the various other demands are pressed on them.
Perhaps I may interpolate here the remark that the last sentence in the letter I received from the Ministry of Health, in particular, in which the argument of priorities is put, is very discouraging compared with the last sentence of the letter from the Scottish Office, which is very optimistic and encouraging, and tells not only of current practice but future intention.
Secondly, will the Minister make it absolutely clear that no charge will be involved either to the patient or the general practitioner for the supply of these sterilised syringes, whether or not disposable? My third point relates to the use of syringes within the general medical services. Can the Minister explain how the Government extend to inaugurate this service? I assume, of course, that the Minister has accepted the M.R.C. report, and that it is the intention to ensure that every doctor is able to call on some centre or hospital to give him an adequate supply of sterile syringes, disposable or otherwise and that it is the Minister's intention to cover the whole country with this kind of service. Fourthly, if such a scheme comes into being, will there be a charge for the syringe? If so, will it be a charge on the patient, or how will it be levied? Or will there be no charge whatsoever?
Those are the four important questions I want to raise. I am much concerned that the Minister should make clear his own position fairly in regard to his Answers to me on hospital supply, and I hope that he can give some hope to the General Medical Services Committee, which has put to him and his right hon. Friend on a number of occasions the hope that the supply of sterile syringes for the general medical services will soon be achieved.

10.10 p.m

The Joint Parliamentary Secretary to the Ministry of Health (Mr. Bernard Braine): The hon. Member for Greenock (Dr. Dicison Mabon) has long shown an interest in the subject of the supply of disposable sterile syringes. I listened tonight, therefore, with great interest to what he said. I can assure him that my Department is extremely interested in the wider use of disposable syringes, but this is part of our concern about the proper sterilisation of all syringes used in hospitals and in general practice. Nor can we consider the use of disposable syringes independently from such questions as tilt internal supply arrangements within hospitals and the reimbursement of practice expenses.
It might be helpful, however, if I first said something about the background to this question of ensuring the use of sterile equipment. It has been known for some time that what used to be considered the normal method of sterilising syringes—that is by boiling them in an ordinary steriliser—was not adequate to safeguard against certain dangers. The most important danger, and the on to which the hon. Member has referred tonight, is the possibility of imperfectly sterilised syringes spreading infective hepatitis, or jaundice. This disease can be serious and in some cases fatal. It is most important to guard against it. I am advised that the risk is particularly important where intravenous injections are concerned, that is to say, where the syringe is used to inject material into the blood stream or to remove something from the blood stream.
I should perhaps refer to a statement the hon. Member made in the course of a supplementary question to my hon. Friend the Under-Secretary of State for Scotland, namely that there was a growing incidence of jaundice, particularly in Edinburgh, arising from the use of non-sterile syringes and that the health authorities had reported this to the Scottish Office. I am sure that the hon. Member made this statement in good faith, but I am advised that no such report has in fact been received and the Edinburgh Public Health Department has confirmed that no statement to this effect was made by it.
As I have said, infective jaundice is a disease which can be associated with infection from syringes. While in most areas in Scotland it is not a notifiable disease, local health authorities make a practice of reporting cases to the Scottish Home and Health Department. I am told that that Department has no information to suggest that jaundice is on the increase. The consultant bacteriologist at the Royal Infirmary says that in his experience the incidence of syringe-spread infective jaundice has dropped steadily over the years.

Dr. Mabon: With reference to the remark the Parliamentary Secretary made, of course I made the statement in good faith, but it is in fact sustained by the minutes of the local medical committee. That perhaps is where the confusion has come about. On 5th March, 1963, in Item 17 the reference is:
he had not made much headway with St. Andrews' House but had received their assurance that the matter would be taken up with the Ministry of Health.
That is more than a year ago.

Mr. Braine: I have made it clear that the Edinburgh Public Health Department has confirmed that no statement was made by them. This, of course, is the sort of question we could explore a little further. I know the hon. Member would not wish to spread alarm and despondency unnecessarily. This is a matter which we should certainly clear up, but my information is that the situation is not as the hon. Member has represented it.
In view of the danger I have mentioned, however, it is generally accepted—I concede this to the hon. Gentleman—that the old methods of sterilising syringes are no longer adequate and that good medicine demands the use of syringes which are made safe by methods which cannot be expected to be found in the ordinary general practitioner's surgery. There, I agree with the hon. Gentleman completely.
There are two methods of overcoming the difficulty. Ordinary syringes can be made quite safe by autoclaving, that is, by heat treating them in special equipment. It might be possible for some general practitioners to receive this service from hospitals, and I shall say something

about this later. The second method, which has come into use more recently, is that envisaged by the hon. Gentleman, namely, that general practitioners should use disposable sterile syringes. These are made of plastic and are intended to be used only once and then thrown away. They are readily available from normal sources of supply. A general practitioner must, of course, if he buys them, be quite sure that they are completely safe to use and that, in order to ensure safety, they have been subjected to one of a number of processes, possibly irradiation by radioactive substances. As with other equipment which he buys, he ought to feel confident that the reputation of the major manufacturers and suppliers is high. There is nothing to suggest that this poses any particular problem.
However, there is one aspect of the matter which has, perhaps, escaped the hon. Gentleman. This is the legal aspect. The general practitioner's use of syringes for normal practice purposes is exactly like his use of any other form of equipment. Practitioners decide what equipment to use, and the total cost is met by the Exchequer. Exactly how these expenses are reimbursed to doctors is a separate question which I shall touch on in a moment, but, whatever may be done in that connection, there is no special reason why the initial spending of money should be taken out of the hands of doctors instead of leaving them free to run their practices in their own way, deciding what material and equipment to use.
In short, general practitioners are independent contractors, and we at the Ministry of Health would hold that in that capacity they are themselves responsible in the first place for incurring any necessary expenditure on equipment, although the Exchequer meets in full the cost of all the expenses which they incur by means of payments into their central pool of remuneration.
As the hon. Gentleman knows, it is some years since the representatives of general practitioners first suggested that there should be a free sterile syringe service for general practitioners either by providing practitioners with free sterilising facilities for ordinary syringes or by giving them disposable syringes. My Department has during this time expressed a great deal of sympathy with


the general practitioner's point of view, but, because of the legal position which I have just mentioned, we have felt that we could not treat this matter differently from other questions concerning the supply of equipment. In a moment, shall endeavour to give the House details of the arrangements which some hospitals have been able to make to provide syringes for particular purposes.

Mr. Kenneth Robinson: Surely, it would not in any way compromise the general practitioner's legal position if he asked the Ministry to arrange for a supply of these disposable syringes on a voluntary basis? There could be no possible objection on legal grounds to that request, if made, could there?

Mr. Braine: I have not a great deal of time. I think that it would be better for me to try to follow the arguments raised by the hon. Member for Greenock and to try to mop up other points as we go on. As regards the general practitioner's own use of syringes in the course of his normal practice, we have felt bound to hold that he should himself, in the first place, incur the necessary expenditure, which would then be reimbursed in the normal way as for all other items of equipment.
I turn now to the arrangements which apply in the hospital service One part of the current expansion of our hospital services has been the development of central sterile supply departments and syringe services. There are now about 50 of these departments, with more than 50 others planned or intended to be developed as the new hospitals of the future come into use. But there are limits to the part that the hospital authorities can play in regard to the work of general practitioners. It is open to them, if they have spare capacity for sterilisation, to consider meeting the needs of local general practitioners, but an appropriate charge would be recovered from the general practitioner for the service provided.
There is, however, another aspect about which the hon. Member is already well informed. Sterile syringes are needed for taking specimens for subsequent examination in a laboratory, and it has been the practice in some hospitals to supply a sterile syringe

without charge when a general practitioner needs one to take a specimen at the request of the hospital. Such an arrangement has the advantage that the provision of a sterile syringe and container would help to ensure that specimens reached laboratories in a thoroughly good condition. But clearly this advantage applies equally when the hospital ha s not initiated the request for the specimen, and hospital authorities have, therefore, been advised by my Department that when the request is initiated by the general practitioner they may supply him without charge provided that the specimen is taken for examination by the hospital laboratory. There is, therefore, no question of a charge being made to the patient.
Various ways have been suggested in which supply might be arranged, but, as my right hon. Friend explained in a recent letter to the hon. Gentleman, it is left to the hospital authorities to apply which ever method suits local or individual requirements. We would expect the type of syringe supplied to depend on that in use at the hospital.
The capacity of hospitals to provide this service must vary, in present circumstances, depending on local conditions, but we have asked hospital authorities to consider what they can do to provide it, either immediately where resources permit, or in the future as syringe services develop. In other words, we are keen to see this kind of service develop as rapidly as possible. But the degree of priority to he accorded to this compared with other hospital service developments is for the hospital authorities themselves to determine. I understand that similar advice has been given to the Scottish hospital boards by my right hon. Friend the Secretary of State for Scotland.
Depending on local circumstances and resources, therefore, hospitals will help in the way I have described, but this is only one aspect of the general question which the ion. Gentleman has raised. I think that he claimed that no authorisation had been given to hospital authorities. My Department's interpretation has been that tie hospital authorities have had the power to provide syringes for taking specimens and this was why it was not necessary to send them a circular. The point has been made clear to hospital author ties at two recent meetings with representatives of the boards.
Since the end of last year we have been engaged with general practitioners in discussions on the reimbursement of practice expenses. As I said, the question of providing a free service to general practitioners for the normal purposes of their practice cannot be looked at in isolation from the wider question of responsibility for providing general practitioners with all the various materials and equipment which they use in carrying on their practice.

Mr. A. Woodburn: Much depends on whether the hospitals have the equipment for sterilising the syringes. For instance, the system in the Royal Infirmary, Edinburgh, which I have seen, is very elaborate. I cannot imagine small hospitals having such a system. Is the hon. Gentleman satisfied that all the hospitals have the equipment necessary to sterilise the syringes before sending them out?

Mr. Braine: I cannot answer that question in any detail tonight. Only last month we took up this matter again with the hospital boards, but my information is that in every region there are hospitals meeting requests from general practitioners. There are admittedly more in some regions than in others. Extension must depend upon local resources and, as I have said, upon local priorities. The fact that the subject has been ventilated here tonight, that we ourselves have been pressing the matter and that this is one of the subjects which we have been discussing with the representatives of general practitioners will all help in this regard. I should not like to suggest that a complete service all over the country could be initiated tomorrow, but we are moving in that general direction.
In the course of our discussions with the general practitioners on reimbursement of practice expenses it would be quite feasible to consider the possibility of introducing some more direct form of reimbursement of expenses incurred on syringes. It is, perhaps, a little difficult to say at this stage that the administrative machinery which would be needed to do this could be justified, because one feels that the amount spent by any one practitioner on syringes and, above all,

the variation of expenditure between different practitioners cannot be very great.
In spite of that, however, if the representatives of the profession wish to explore the possibility of a more direct form of reimbursement of expenditure on equipment, we would be ready to discuss this with them. I hope that what I have said on this will assure the hon. Member for Greenock that we are deeply interested in the subject he has raised and that we are anxious to make progress. I thank him both for raising the matter tonight and for the way in which he has done so.

10.27 p.m.

Mr. Kenneth Robinson: The House is, and, indeed, should be, grateful to my hon. Friend the Member for Greenock (Dr. Dickson Mabon) for raising this subject tonight. The Joint Parliamentary Secretary's reply to my hon. Friend is one of the most unsatisfactory replies I have heard in an Adjournment debate for a long time. What the hon. Gentleman has revealed is a state of absolute chaos in the two Departments about the provision of syringes. Surely it is time that he and his right hon. Friend and the Secretary of State for Scotland got down to the question of providing an efficient free service of sterile syringes, disposable or otherwise, to general practitioners.
To mention one point which came at the end of his speech, the hon. Gentleman suggested that there might be great administrative difficulties in making a direct reimbursement for money expended by G.P.s on syringes. If that is so difficult and all that the hon. Gentleman proposes to do is to pay back the money that the G.P.s have paid for their syringes, would it not be far simpler administratively and from every other point of view to provide them free in the first instance? I hope that the hon. Gentleman will now get down to putting the supply of disposable, or sterile syringes on a sound, proper basis.

Mr. Braine: The hon. Member for St. Pancras, North (Mr. K. Robinson) should not have chided me for mentioning that there are difficulties, when he


knows perfectly well—I do not need to remind him of what I said earlier—that a vital principle is at stake in regard to the way in which practice expenses should be reimbursed. What I said, and what he did not acknowledge, was that discussions were taking place with the profession—the hon. Member knows this as well as anyone. This is a matter which, among many others, we are prepared to discuss with representatives of the profession. I went out of my way to say that we would be ready to discuss it with them.
I would not have the hon. Member try to leave the House with the impression that we are dragging our feet in this regard. That is not so. This is a matter which has to be discussed with the profession and it is one which, for the reasons I have given, cannot be rushed. I repeat that I am grateful to the hon. Member for Greenock for raising this matter.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.